Remy Cointreau bets on the U.S. and China for a robust recovery in the second half

In a report on Thursday, Remy Cointreau (EPA: RCO) said that it estimates an about 45-50% decline in the first half (H1) operating profit. The company, however, expressed confidence that two of its key markets, the United States and China, will drive robust recovery in H2.

Shares of the Remy Martin owner are currently 8% up on Thursday. At £109 per share, the company is about 10% up year to date in the stock market after recovering from £75 per share in March. Learn more about how to invest in the stock market.

Remy Cointreau sees higher demand in the U.S. and China

The French company said that the United States showed greater demand for its spirits in recent weeks where COVID-19 is fuelling consumption at home. The spirits maker also highlighted on Thursday that sales are quickly recovering in China specifically in key regions like Shanghai and Guangdong as the largest Asian economy permits restaurants, bars, and clubs to reopen for public after the Coronavirus pandemic.

The new CEO, Eric Vallat, also announced revised medium-term targets for Remy Cointreau as he pledged to boost margins via higher-priced spirits. As per Vallat:

“We maintain the value strategy, but we will refine it and make it more efficient. The challenge for us is to deliver the right offer at the right place. Demand exists and will keep growing.”

Taking over the role in December 2019, Vallat is committed to adjusted Remy Cointreau’s business model to prioritize sustainability.

Remy Cointreau forecasts a 45% decline in Q1 sales

Remy Cointreau also forecasts a 45% decline in Q1 sales that came in lower than 50-55% decrease that it had estimated earlier. In Q2, the company anticipates a more moderate decline.

According to analysts, the Paris-headquartered company is likely to see a 5.7% decline in comparable sales and a broader 9.1% decline in operating profit in fiscal 2020/21.

For fiscal 2019/20, Remy Cointreau recorded a 22% decline in comparable sales while its operating profit margin dropped from 23.5% to 21%. By 2030, the spirits maker is now aiming for an operating margin of 33% and a gross margin of 72%.

Remy Cointreau’s performance was reported slightly upbeat in 2019 with an annual increase of roughly 10% in the stock market. At the time of writing, the French spirits manufacturer has a market cap of £5.48 billion and a price to earnings ratio of 39.29.