December 1 2023  |  Industry News

Rémy Cointreau posts first-half 2023-24 results

By Hibah Noor

French spirits group Rémy Cointreau has revealed its first-half 2023-24 results, with a Current Operating Profit (COP) of €169.1 million (US$184.3), -43.0% on an organic basis compared with a record baseline.

Sales are down -22.2% on an organic basis, reflecting continued strong destocking in the United States while gross margin is showing “solid resilience”. Rémy Cointreau generated consolidated sales of €636.7 million (US$693.8 million) in the first half of 2023-2024, down -22.2% on an organic basis (up +20.9% compared to the first half of 2019-2020). On a reported basis, sales were down -26.6% including a negative currency effect of -4.4%, due primarily to trends in the renminbi (Chinese yuan) and the US dollar.

Rémy Cointreau CEO Eric Vallat commented, “Our half-year results were heavily impacted by developments in the US market, which has faced cyclical headwinds including high inventories linked to a sharp normalization of consumption, an unprecedented promotional environment, and rising interest rates.

“Against this backdrop, we are staying the course, convinced that our value-driven strategy remains underpinned by favorable medium- and long-term trends. This is why we opted to implement cost-cutting measures to mitigate short-term effects. Despite limited visibility over the next few months, we are taking a much longer-term view, building on desirable 300-year-old brands with a unique heritage. Today we are determined to follow our roadmap as we implement our four strategic priorities, and we are confident that we will achieve our medium-term objectives in 2029-30.”

The Cognac division -half sales fell -30.1% on an organic basis (+9.4% compared to 2019-20), including a -39.0% fall in volumes and a steep +8.9% rise due to price-mix. This reflects both a significant decline in sales in North America where the Group aims to reduce its inventories and is facing a normalization of consumption in a fierce promotional environment and solid trends in the rest of the world.

The Liqueurs & Spirits division sales were steady (+0.1%) on an organic basis (up +55.8% compared to 2019-20), reflecting a -6.5% decrease in volume and a +6.6% rise due to price mix. Sales accelerated sharply in the second quarter, rising +12.1% on an organic basis in the wake of a steep recovery in the US, as expected. The rest of the world showed good trends.

For full-year 2023-24, Rémy Cointreau assumes the following:

• In the United States, market conditions have deteriorated on the back of a fiercely promotional environment and a rise financing capacity. Consequently, Rémy Cointreau does not expect a return to growth in sales before fiscal 2024-25.

• In APAC, the Group expects growth in sales, tempered by a slower than anticipated post-Covid economic recovery in China.

• Lastly, in the EMEA region, the Group expects annual growth to be moderated by a persistently inflationary context.

In this context, Rémy Cointreau is determined to protect its 2023-24 profitability through tight cost controls, while continuing to roll out its medium-term plan. The company will maintain a strict and uncompromising pricing policy and protect its gross margin in a persistently inflationary environment. It also noted it will selectively reduce its marketing and communications spend, particularly for the Cognac division and significantly reduce other operating costs.

As a result, for full-year 2023-24 Rémy Cointreau expects sales to decline by between -15% and -20% on an organic basis and a contained organic decrease in COP margin thanks to deployment of a major cost-cutting plan, estimated at around €100 million (US$109 million) this year.

Rémy Cointreau said it is ahead of its strategic plan, with operations underpinned by solid foundations and a long-term vision. “This makes 2023-24 a year that will allow the Group to return cognac inventories in the United States to healthier levels and absorb the effects of post-Covid normalization before heading into 2024-25 in the best possible conditions, resuming the trajectory it set itself for 2029-30.”

Rémy Cointreau reiterates both its financial and extra-financial targets for 2029-30, and its aim to become the global leader in exceptional spirits. The Group targets a gross margin of 72% and a Current Operating Margin of 33% (based on 2019-20 consolidation scope and exchange rates). As part of its ‘Sustainable Exception’ plan Rémy Cointreau plans to train and engage 100% of its direct partners in agriculture in sustainable farming practices, targeting a 50% reduction in carbon emissions per bottle by 2030. This is the first step towards achieving zero net carbon status in 2050 a trajectory compatible with holding global warming to +1.5°C.

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