* Annual profit down 38.8 pct vs guidance of 35-40 pct fall
* Aims for organic sales, current op profit growth this year
* Chairman Herard Dubreuil says controlling family "no seller"
* Shares up 1.3 pct, reversing losses (adds Remy chairman comments on stake, analyst)
By Dominique Vidalon
PARIS, June 5 (Reuters) - Remy Cointreau suffered a near 40 percent drop in profit for the year ended March 31 because of a crackdown on corporate gift giving in China and slower growth in the world's second-biggest economy.
Cognac accounts for 80 percent of Remy's operating profit, with China contributing half. Remy's focus has been on deluxe drinks like Louis XIII cognac, which sells for 2,500 euros ($3,400) a bottle, making it more vulnerable to the crackdown than rivals such as Diageo and Pernod Ricard.
The company aims to increase sales and operating profit, excluding acquisitions, in the current financial year, driven by improving demand in China and a strong U.S. market.
Remy cut shipments to China to prevent wholesalers from discounting prices, a decision which hit its sales and earnings in 2013/14. It expects that cognac sales from wholesalers to retailers, restaurants and bars will stabilise or possibly rise in China this year, Chairman Herard Dubreuil told a news conference.
"There is no evidence that the Chinese would be (durably) staying away from cognac consumption," Dubreuil said.
Societe Generale analysts said in a note that the market consensus was for Remy to achieve 3 percent sales growth and 8 percent operating profit growth in the current year, excluding acquisitions.
Dubreuil told Reuters after the results conference that the Herard Dubreuil family, which controls 60 percent of Remy Cointreau's voting rights, had no plan to sell its shares, notably given its growth potential.
"I am no seller," Herard Dubreuil said, when asked about recent speculation that Brown-Forman, the U.S maker of Jack Daniel's whiskey, was eyeing the French cognac producer. He said he was speaking for the whole family.
Remy is looking for a chief executive to help it navigate a recovery after its last boss Frederic Pflanz resigned in January after only three months in the job.
Herard Dubreuil, who has been acting as interim CEO since Pflanz left, said he was "very confident" Remy would have a new CEO before the end of 2014.
By 1203 GMT, Remy shares were up 1.6 percent at 68.68 euros, having erased a drop of 3 percent at the market open.
"Through the worst? Almost certainly and the scope for further massive downgrades now looks very limited," Mirabaud Securities analysts wrote in a note.
Operating profit excluding exceptional items for the year ended March 31 fell almost 40 percent to 150.2 million euros, in line with company guidance.
Operating profit at the cognac division fell 44 percent on a comparable basis to 125 million euros because of destocking in response to weak demand in China.
The liqueurs and spirits division also saw a 21 percent fall in profit to 37.1 million euros hurt by lower sales of Passoa liquor which suffered from greater competition and needed more spending on marketing.
The dividend was cut to 1.27 euros a share from 1.40 euros previously.
Despite the challenges in China, Remy has said it would maintain investments in its brands and distribution networks since emerging markets remained its best long-term growth opportunity. Such investments together with a share buy back programme led net debt to increase to 413.5 million euros at the end of March 2014 from 265.5 million euros a year earlier.
Remy trades at a premium to peers. The stock is valued at 36.22 times 12-month forward earnings, against 18.25 for Pernod and 18.72 for Diageo, according to Reuters data.
Remy shares have gained 11.5 percent so far this year, beating a 6.2 percent gain in their European sector.
Pernod has warned that demand in China could stay sluggish until 2015.
($1 = 0.7341 Euros) (Editing by Leila Abboud, Additional reporting Pascale Denis; Editing by Elaine Hardcastle)