* Q4 cognac sales down 32.3 pct vs 32 pct in Q3
* Sees 35-40 pct fall in FY operating profit
* Expects "tangible" net debt hike as maintains investments
(Adds details from statement)
By Dominique Vidalon
PARIS, April 17 Remy Cointreau warned
on Thursday that full-year operating profit would fall between
35 and 40 percent as a Chinese government crackdown on
ostentatious spending that is hurting demand for premium cognac
showed no signs of abating.
The maker of Remy Martin cognac, Cointreau liqueur and Mount
Gay Rum said it was nevertheless maintaining investments in its
brands and distribution networks, reflected in a "tangible"
increase in net debt at the end of March.
In November, the French spirits group had already warned
that full-year operating profit would fall by at least 20
percent, blaming China.
"The trend did not improve in the fourth quarter in China",
Remy said in a statement, adding that it pursued its destocking
effort against "the backdrop of further stringent measures to
restrict conspicuous consumption".
Like global rivals such as Diageo and Pernod Ricard
, Remy has been hit by a Chinese government crackdown
on gift-giving and personal spending by civil servants, as well
as slowing growth in the world's second-biggest economy.
Larger rival Pernod said last month it expected demand in
China to remain sluggish until 2015 and that the anti-corruption
clampdown was getting tougher and was now targeting traditional
Karaoke bars where high-end tipples such as cognac are consumed.
Remy Cointreau said on Thursday that group sales reached 186
million euros ($256.8 million) in the three months to March 31.
The like-for-like year-on-year sales decline was 16.1
percent, against 18.9 percent in the third quarter.
Cognac sales alone slumped 32.3 percent in the fourth
quarter, having fallen 32 percent in the third, which was more
than analysts' average estimate of a 30 percent fall.
Cognac accounts for 80 percent of Remy's operating profit,
with China making up half of that. In addition, Remy's focus on
deluxe drinks like Louis XIII cognac, which sells for 2,500
euros a bottle, makes it more vulnerable than some rivals to the
Chinese government moves, analysts say.
On the bright side, the United States continued to deliver
good cognac sales, as did Russia, Japan and Africa. The liqueurs
and spirits division saw a quarterly sales decline of 7 percent
but a 3 percent rise on the full year.
Despite its difficulties in China and its management vacuum
- the group is looking for a permanent CEO - Remy still trades
at a premium to peers. The stock is valued at 30.56 times
12-month forward earnings, against 17.76 for Pernod and 17.89
for Diageo, according to Reuters data.
($1 = 0.7243 Euros)
(Editing by James Regan)