October 18, 2016 / 1:20 PM / a year ago

UPDATE 1-Remy Cointreau sales rise as China regains taste for cognac

(adds CFO comments, forecasts from call, shares, analyst)

By Dominique Vidalon and Pascale Denis

PARIS, Oct 18 (Reuters) - Remy Cointreau said sales rose more than expected in the second quarter thanks to recovering demand for cognac in China and growing appetite for the premium brandy in the United States, its largest market.

Like other spirits makers, including larger rivals Diageo and Pernod Ricard, Remy Cointreau was hit by falling sales of cognac and other luxury goods in China following a government crackdown on corruption and conspicuous consumption since 2014.

“In China we benefited from a very strong Mid-Autumn Festival,” said Chief Financial Officer Luca Marotta. “We are positively surprised by the acceleration we are experiencing in Greater China.”

The maker of Remy Martin cognac and Cointreau liquor, which is on a drive to sell higher-priced spirits to boost profitability, said it was comfortable with the consensus of analysts’ estimates for full-year organic operating profit growth of 8 percent.

The company said that sales rose 7.4 percent to 294.8 million euros ($330.21 million) in the second quarter to Sept. 30, against a flat performance in the first quarter and beating a company compiled consensus of 4.3 percent.

Sales of cognac rose 9.3 percent in the second quarter from an 0.5 percent decline in the previous quarter.

Remy Cointreau has stepped up spending on advertising and marketing, particularly in the United States to boost demand for its Remy Martin and 1738 Accor Royal cognacs.

“With the cognac division accounting for 72 percent of profits, we see Remy attractively positioned for medium-term growth. We see upside as the CEO rolls out her vision for the company as a niche super-premium business,” said Jefferies analysts in a note.

By 1259 GMT Remy shares were up 2.5 percent at 76.90 euros, while shares in Pernod Ricard, which reports sales on Thursday, were up 1.8 percent.

$1 = 0.8928 euros Reporting by Dominique Vidalon; Editing by Mathieu Rosemain and Louise Heavens

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