Cognac bottles Rémy Martin VSOP, Cognac Rémy Martin XO and Brandy St-Rémy XO
Rémy Cointreau reported on Friday the growth of its sales in the first quarter for the first time since the beginning of 2023 and noted its profit forecast for the whole year, while customs threats are fading, which arouses a certain optimism around the French manufacturer of spirits.
Cognac manufacturer Rémy Martin and Liqueur Cointreau published a turnover of 220.8 million euros for his first quarter, against 217.0 million euros a year earlier, while analysts were tabling an average of 213.9 million and an organic increase of 2.3%, according to consensus provided by the company.
The action is advancing more than 4% in the first exchanges on Friday on the Paris Stock Exchange.
This result marks the first quarter of turnover growth since the beginning of 2023, after the group was faced with an erosion of its sales in its main American and Chinese markets.
Rémy Cointreau explains that this increase is due to a strong progression of its sales in the United States, supported by a very favorable comparison base.
Sales in China continued to decrease during the quarter with difficult market conditions and the non-accessibility of the Duty Free Chinese, but Rémy qualified this decline as “limited”.
Inflation in the United States and the drop in consumption in China already complicated Rémy’s activities even before real or potential customs duties were imposed on these two key markets.
Beijing has imposed customs duties since October 2024, but they were reduced as part of an agreement concluded at the beginning of the month between the spirits industry and the Chinese authorities.
The group said earlier this month having concluded an agreement with the Chinese authorities committing to respecting a minimum import price to China and, in return, the “final” anti-dumping rights which were to be imposed on European exports will not be applied.
The company says it is now expected that customs duties have a total net impact of 45 million euros over the whole year, compared to 65 million euros previously.
If Rémy Cointreau has reduced the amount of the impact linked to Chinese customs duties from 40 million euros to 10 million euros, it noted that expected from American surcharge on European products at 35 million euros, against a forecast of 25 million euros before.
The revised forecast is based on the assumption that European exports to the United States will be subject to a customs duties of 30%, the level that US President Donald Trump threatened to impose on August 1 if the negotiations in progress did not lead to a more favorable agreement.
Previously, the group tapped on a rate of 20%.
However, according to two diplomatic sources, Washington and Brussels are close to an agreement that would provide for basic customs duties of 15% on imported European products.
“If this tariff rate is reduced to 15%, this could represent a gross increase of 8% of EBIT forecasts; if the spirits are exempt from American customs duties, this would represent a gross increase of 16% of forecasts,” write Jefferies analysts in a note.
“Even if part of this increase could be reinvested/absorbed if the second half is more difficult in terms of turnover, this would imply a new revision upwards of forecasts at a later stage,” they add.
Rémy Cointreau is now expecting an organic decrease in its current operational profit (ROC) annual between 5% and 9% (“Mid-to-High-Single-Digit”), against a decrease of 15% to 20% (“Mid-to-High-Téens”) previously anticipated.
The group achieves around 70% of its turnover thanks to Cognac, mainly in the United States and China, which makes it more exposed to customs duties and economic slowdowns than its competitors Diageo and Pernod Ricard, which have wider portfolios and geographic coverage.
Group cognac sales also increased by 1.3% in organic terms, also exceeding expectations, despite difficult market conditions in China and a sharp drop in sales in Europe, the Middle East and Africa.
(Report Emma Rumney, French version Diana Mandiá, edited by Kate Entringer and Augustin Turpin)