PARIS (Reuters) -French spirits manufacturer Rémy Cointreau lowered its objectives for the 2024-2025 financial year on Friday, due to deteriorated market conditions in China and the lack of visibility on a recovery timetable in the United States. United.

Producer of Rémy Martin cognac and Cointreau triple sec, the group recorded an organic drop of 16.1% in its turnover in the second quarter, more than the 15.4% decline anticipated by a consensus of analysts cited by the group.

While it anticipated a gradual improvement over the course of its financial year, which began on April 1, Rémy Cointreau had to lower its ambitions in the face of persistent difficulties in the United States and China.

It is now targeting a “double-digit organic decline” for its annual turnover compared to the “gradual recovery during the year” planned until then.

Concerning the current operating margin, the group is counting on an “organic deterioration” partially offset by a cost reduction plan of more than 50 million euros, against a “protection of profitability” previously targeted.

The third quarter of 2024/2025 will be “the most difficult” but sales in the United States should “rebound in the fourth quarter”, estimated the financial director of Rémy Cointreau Luca Marotta during a conference call with analysts.

The group has confirmed its objectives for 2025-2026, with organic growth in annual turnover expected around 9% (“high single digit”) and a progressive organic improvement in current operating margin.

It also kept its margin objectives unchanged for 2029-2030.

“Given the current uncertainties, as well as the weakness in the spirits market and the continued deterioration in growth and profitability, we are surprised that management maintains its objectives” for organic growth for 2026 and that it reiterates its ambitions for 2030, JPMorgan analysts estimated in a note published Friday.

On the Paris Stock Exchange, Rémy Cointreau shares fell 0.67% to 59.25 euros around 9:30 a.m. GMT after a volatile run. The stock gained almost 2% in the morning and fell as much as 3.5%.

FALLING COGNAC

Chinese consumers have largely slowed down their purchases due to a difficult economic context, while in the United States, the sector is penalized by excessive stocks which are still being sold.

The division dedicated to cognac, the first to be affected, suffered from an organic fall of 20.7% in Q2, even more significant than that of 18% predicted by analysts’ estimates.

Rémy Cointreau generates around 70% of its sales from cognac, the vast majority of which in the United States and China.

The turnover of the division dedicated to liqueurs and spirits fell by 4.9% in the second quarter.

Furthermore, Rémy Cointreau said it took note of China’s provisional decision to apply additional customs duties of 38.1% on cognac imports.

“If these provisional rights were confirmed, the impact would be marginal for the 2024-2025 financial year and the group would activate its plan to mitigate the effects from 2025-26,” indicates the manufacturer.

Luca Marotta said the customs measures will lead to price increases from the group which is currently carrying out research to assess the impact on sales.

The largest player and competitor of Rémy Cointreau, Pernod Ricard announced last week a greater than expected drop in its sales in the first quarter, due among other things to poor performance in China.

Luxury giant LVMH, owner of Hennessy cognac, failed to meet forecasts for its third quarter, also identifying Chinese market conditions as the source of its difficulties.

(Written by Florence Loève and Dominique Vidalon, edited by Blandine Hénault)

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