UPDATE 2-Remy Cointreau's strong sales growth slows

Thu Oct 18, 2012 7:08am EDT

Related News

* Q2 like-for-like sales up 5.3 pct vs 24.4 pct in Q1

* Q2 like-for-like cognac sales up 8 pct vs 37.8 pct in Q1

* Some uncertainty for outlook in Asia - CFO

* Still aiming for significantly improved earnings

* Shares down 6 percent (Adds comments from CFO)

By Dominique Vidalon

PARIS, Oct 18 (Reuters) - French drinks group Remy Cointreau reported a sharp slowdown in sales growth in the last three months on Thursday, saying Asian wholesalers were holding back on new cognac orders after stocking up in the previous quarter.

However, the maker of Remy Martin cognac, Cointreau liqueur and Mount Gay rum said while demand in Europe lagged, the appetite for its most expensive brandies remained robust in Asia and the United States, as it confirmed its goal for a significant improvement in full-year earnings.

"We saw a bit of a wait-and-see attitude in Asia but we are not worried about it," Chief Financial Officer Federic Pflanz told a conference call.

"The Chinese consumer continues to go out as much as before but we felt a bit of a wait-and-see attitude in our billings (to wholesalers) ... Vietnam is also slowing down a bit" he added.

The comments, which stoked fears that demand from Asia for luxury goods may be cooling, and weaker-than-expected quarterly sales, sent Remy's share price down 6 percent to 81.91 euros.

Remy's shares, which set an all-time high of 97.44 euros on July 30 following its report of strong first-quarter sales, have gained 40 percent this year, outperforming the Stoxx Europe 600 food and drinks sector index, which is up 18.8 percent.

"This signal of a more marked business slowdown should weigh on the shares in the short term," Gilbert Dupont analysts wrote in a note, cutting their rating to "reduce" from "add".

Asian demand for premium brands has helped shield luxury companies from the worst of the European slowdown, but with China on track for its slowest year of economic growth since 1999, concerns are emerging for sales of luxury products, including drinks.

ROBUST U.S.

The world's biggest spirits group, Diageo, said on Wednesday that a postponed duty free shipment and a weak South Korean market hampered quarterly trading in its Asia-Pacific region.

Remy, which has a market capitalisation of 4.4 billion euros, competes with Diageo and Pernod Ricard.

Remy said revenue rose to 324.1 million euros ($425.25 million) in the second quarter to Sept. 30. Like-for-like sales growth was 5.3 percent, with cognac sales rising 8 percent.

This was below average expectations for 11.3 percent like-for-like revenue growth in a Reuters poll of six analysts and showed a sharp slowdown from first-quarter like-for-like sales growth of 24.4 percent, with cognac sales rising 37.8 percent, helped in part by restocking.

However, growth in demand for brandies in the Asia-Pacific region continued to be driven by premium bottles such as its Louis XIII cognac, which sells at an average price of 2,000 euros and the region now accounts for 60 percent of the group's total cognac sales.

"We continue to do do very well in the very high-end sector," Pflanz said.

In the United States, a positive trend on cognac sales since the start of the financial year was also maintained, with a double-digit percentage growth, the company said.

Remy Cointreau makes 38 percent of overall sales in the buoyant Asia-Pacific region and 31 percent in the United States.

The group's liqueurs and spirits division posted a 0.4 percent quarterly drop in organic revenue, as sales of its Greek spirit Metaxa slowed, hit by the economic crisis there. ($1=0.7621 euros) (Editing by James Regan and Greg Mahlich)