* H1 op pft 132.7 mln, down 7.3 pct l-f-l vs f'cast 124 mln
* Cognac op profit down 11.7 pct l-f-l
* China slowdown, higher advertising to weigh on H2
* Liqueurs and spirits H1 op profit up 2.6 percent
* Shares down 10 pct, hit near two-year low
(Adds details, CEO quotes, analyst quotes)
By Dominique Vidalon
PARIS, Nov 26 French spirits group Remy
Cointreau SA warned full-year operating profit would
fall by at least 20 percent as a Chinese government crackdown on
ostentatious spending hurts demand for its premium cognac.
Its shares plummeted more than 10 percent to a near two-year
The maker of Remy Martin cognac, Cointreau liqueur and Mount
Gay Rum said wholesalers in China were still running down high
inventories and it did not know when demand could pick up, with
sales prospects for the Chinese New Year in February looking
"The second half will be sharply impacted by China and we
want to continue investing, so we expect a decline of 20 percent
or slightly more in full-year operating profit," Chief Executive
Frederic Pflanz told a news conference on Tuesday.
"We still have a tense situation on stocks and we do not
have positive expectations for the Chinese New Year," Pflanz
Remy's operating profit in its last fiscal year was 245.4
million euros ($331.5 million).
Like its global rivals such as Diageo Plc and Pernod
Ricard SA, Remy has been hit by a Chinese government
crackdown on gift-giving and personal spending by civil
servants, as well as slowing economic growth in the world's
Pernod for instance flagged this issue earlier this year,
saying business during the Chinese New Year was "softer" this
year than last.
Yet the emerging concern is that the squeeze is continuing
with no signs of when demand will pick up.
Analysts at brokerage Liberum Capital said Remy's profit
guidance was "disappointing and worrying" and was "much worse
than our estimate of minus 8 percent for the year and consensus
of minus 2 percent".
By 1052 GMT Remy shares were down 10.5 percent to 64.33
euros, while Pernod slipped 2.7 percent and Diageo lost 1.1
Remy shares had already has lost 14 percent so far this year
amid growing concern over the impact of a slowdown in China, at
the same time as the STOXX Europe 600 food and drinks sector
index has gained 9 percent.
The China slowdown contributed to a 10.4 percent fall in
Remy's cognac sales in the first half, which included a 25
percent slump in cognac sales in China alone.
Group operating profit for the six months to Sept. 30
reached 132.7 million euros, down 7.3 percent like-for-like from
a year ago but beating analysts' expectations for 124 million,
according to Thomson Reuters I/B/E/S, but including lower
advertising and promotion expenses.
The group's cognac division reported an 11.7 percent fall in
like-for-like first-half operating profit.
Pflanz said the Chinese crackdown was hurting cognac sales
in restaurants and karaoke clubs where consumers were wary they
could be seen. By contrast, sales in stores and in night clubs
where consumers felt more anonymous were more resilient.
In the longer-term, Remy said it remained confident over
growth prospects in China as it stakes the thirst of an ever-
growing number of affluent Chinese for its premium cognacs.
It said it would step up advertising and promotional
spending in the second half in a bid to boost sales.
Remy's liqueurs and spirits division, where operating profit
rose 2.6 percent in the first half, was a bright spot as
Cointreau sales grew in the United States and in key European
markets. Metaxa liquor and Mount Gay rum also did well.
($1 = 0.7404 euros)
(Editing by Louise Heavens and David Holmes)