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Remy Cointreau will see M&A pressure building

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A man pours cognac into a glass in Cognac, France, November 21, 2018. REUTERS/Regis Duvignau

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LONDON, Nov 25 (Reuters Breakingviews) - Remy Cointreau (RCOP.PA) has given investors a new reason to celebrate. The 10 billion euro cognac maker is now targeting “very strong”, rather than merely “strong”, growth in operating profit for the year ending March 2022, sending its shares up 11%. Operating profit more than doubled year-on-year in the six months to September to 213 million euros. Inflation is actually helping: Remy can charge higher prices while input costs for products like whiskey and cognac, which have been sitting in a barrel for years, barely budge.

Competitors Pernod Ricard (PERP.PA) and Diageo (DGE.L) have been more acquisitive, boosting exposure to high-growth spirits like tequila. Remy says it is “not in the mood” for external expansion. With net debt of just 0.8 times EBITDA and lower French tax boosting net income, as well as a strong track record in China and the United States, the pressure to spend will build. (By Dasha Afanasieva)

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Editing by Ed Cropley and Oliver Taslic

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