(News Bulletin 247) – The company’s current operating margin fell by more than 10 percentage points in the first half of its 2023-2024 financial year, ended at the end of September. However, the market expected worse.

If the plunge in Rémy Cointreau’s results is impressive on paper, it is not that surprising. The spirits group has been facing a normalization of demand for several quarters (which had certainly reached exceptional levels) with high inventory levels.

The company’s accounts obviously do not emerge unscathed, as illustrated by the results for the first half of the 2023-2024 financial year, closed at the end of September.

Already published, the company’s turnover fell by 22.2% on a comparable basis over one year to fall to 636.7 million euros. Current operating income (ROC) showed a drop of 43%, still on a comparable basis, to 169.1 million euros.

The corresponding margin stood at 26.6% compared to 36.8% in the first half of the 2022-2023 financial year, which however marked a record. The group had then completed the equivalent of a year of ROC in six months.

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High stocks in the United States

“Our half-year results were strongly impacted by the American market which is facing economic headwinds: significant inventory levels linked to a strong normalization of consumption, unprecedented promotional intensity and rising interest rates,” explained the company’s general director, Eric Vallat, quoted in a press release.

Net profit was divided by almost two to 113.8 million euros. Debt increased, with a net debt to gross operating profit (Ebitda) ratio which rose from 0.65 at the end of September 2022 to 1.57 a year later, a level which nevertheless remains comfortable.

Concerning its outlook, Rémy Cointreau confirmed all of its objectives for the entire current financial year, namely a drop in its turnover of between 15% and 20% on a comparable basis as well as a drop ” controlled” of its current operating margin, which will benefit from a cost reduction program of 100 million euros.

“In the United States, market conditions have deteriorated with the persistence of a highly promotional environment and the rise in interest rates which impacts the financing capacities of distributors. As a result, Rémy Cointreau does not anticipate a recovery of sales growth before the 2024-25 fiscal year”, the company specifies in passing.

On the Paris Stock Exchange, investors hesitated somewhat when analyzing this publication. The stock opened down 1%, before taking off to reach more than 7% and then erasing this increase. Around 11:40 a.m., the stock rose 1% to 109.6 euros.

The market expected worse

UBS notes that the group very slightly missed expectations on its ROC (169.1 million euros against a consensus of 169.7 million).

But “we believe that investors were counting on a significant failure, before publication,” explains the Swiss bank. Consequently, with “an organic decline in ROC largely in line with the consensus, this could be enough to meet the expectations” of these same investors, deduced UBS in its note published before the market opened.

Stifel, for its part, confirmed its “hold” advice and its price target of 115 euros. Last month, the research office lowered its recommendation and abandoned its purchase advice, deploring “reduced visibility”.

“It is painful to throw in the towel after the collapse in share prices over the last six months but visibility is so low that we fear the stock will be ‘dead money’ for a while time”, judged the bank.

Stifel then noted that cognac stocks had increased again during the last quarter, sending the wrong message about underlying demand. The research firm expects it will take at least two more quarters for this excessive inventory level to be liquidated.