(Reuters) -Remy Cointreau falls on the stock market on Wednesday after having declared to expect an organic decline in its annual turnover at the bottom of its forecast range, the group citing the uncertainties as to the recovery of its sales in the States- United and the impoverishment of market conditions in China.

In Paris, around 11:10 a.m. GMT, the title abandoned 5.35% to 56.55 euros, despite the lower than expected decline of Rémy sales in the third quarter, supported by the better than anticipated performance for its flagship product, Cognac .

The manufacturer of Cognac Rémy Martin and Liqueur Cointreau retained his annual forecasts from a drop in sales between 15%and 18%, but warned that this drop would be “close” by 18%, while analysts expected Rather to a decrease of 16.9%.

“The recent weakening of cognac demand in the United States, amplified by the effects of destocking, weighs on profits and the feeling of investors,” said Stifel analysts in a note published on Wednesday.

“Despite the adjustment, the stock market narrative is forced by the risks of decrease in key markets and the increase in leverage,” also estimated JPMorgan analysts on Wednesday.

The fourth quarter will be “decisive”, details the French group of spirits in a press release.

In this context, Rémy Cointreau has announced a new cost reduction plan up to 50 million euros in order to protect its common operating margin in organic. This should be between 21% and 22% over the year, the group confirmed.

Weakened by a significant and persistent drop in sales, Rémy Cointreau had already reduced his forecasts for the year in October, and had warned of a larger fall than that provided by investors.

This situation has worsened the stock market losses, the title Rémy Cointreau having already lost some 50% of its value since last January. Its course/benefit ratio has also experienced strong drops.

Burned investors have only to hope for signs of improvement, said John Moore, senior manager at RBC Brewin Dolphin, shareholder of Rémy Cointreau. He added that group’s confidence in long -term growth was reassuring.

“We will probably wait for this for a while, but not forever,” he continued.

Delayed resumption in the United States

The owner of the Cognac Rémy Martin and Cointre had a lower than expected drop in sales in the third quarter.

Cognac sales, which constitute most of the group’s turnover, have indeed less fell than expected, from 22% in organic to 155.7 million euros, against a drop of 27.6% expected per Analysts according to a consensus compiled by Rémy Cointreau.

In the United States, where high interest rates, inflation and high promotions of competitors weighed on income, Remy underwent a new two-digit drop in sales.

During a presentation to analysts on Wednesday morning, the financial director of the Luca Marotta group warned that the resumption of Cognac sales in the United States would be delayed after the fourth quarter.

The group also noted a “marked decline” in China, where the economy is slowed down and where purchases were moderate around the Lunar New Year, which fell on January 29 this year. This date, earlier than that of the previous year, therefore implies a negative impact on the future results of the fourth quarter.

The American and Chinese markets generate the majority of cognac sales, which represent around 70% of Rémy’s turnover.

The other division of Rémy Cointreau, the liqueurs and spirits, posted a turnover in organic decline of 20.1% in the third quarter, in particular due to sales in “strong decrease” in the United States. The Asia-Pacific region has recorded “strong growth”, led by China and South East Asia.

In total, quarterly turnover has an organic drop of 21.5% to 254.1 million euros, a slightly less pronounced drop than the 23.3% expected by analysts.

Luca Marotta said he would expect, in general, a slight improvement in trends compared to the third quarter.

The cognac manufacturer is also faced with customs duties in China and the threat of taxes in the United States, which could harm his activities more.

(Report Dominique Vidalon, written by Pauline Foret and Florence Lève; edited by Kate Entringer and Augustin Turpin)

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