(AOF) – The Rémy Cointreau share (+4.53% to 60 euros) is among the strongest gains on the SRD market while the wine and spirits group published this morning less disappointing results than anticipated at the first half-year of the 2024-2025 financial year. In a context marked by the persistent lack of visibility relating to the recovery timetable in the United States and a deterioration of market conditions in China, Rémy Cointreau believes that there will be no resumption of growth in the Americas zone: before the fourth quarter of 2024-2025, at the earliest.
Over this 2024-2025 financial year, in the APAC region, the owner of the Rémy Martin brand expects a sequential deterioration in sales in the second half compared to the first half. Then in the EMEA region, he mentions continued subdued consumption in the second half.
“The second half of the year will be marked by continued efforts within the framework of the 50 million euro savings plan for the current financial year. However, it is imperative to stay the course and the time has come to prepare for the recovery This is why, from the second half of the year, certain marketing investments will be reintroduced to support peaks of activity in the United States and China,” declared general manager Eric Vallat.
Faced with a complex economic and geopolitical context, Rémy Cointreau nevertheless explains that it has managed to preserve its margin over this first half “thanks to rigorous cost management and a now more agile organization”.
It recorded a current operating income (ROC) down 17.6% organically to 147.3 million euros, or 27.6% margin, up 1 point as published and down 0.5 point in organic. The drop is less pronounced than expected, with analysts anticipating an organic fall of 20.6% to 134.3 million euros.
The decline in profit “reflects the marked decline in turnover, the majority of which was offset by a drastic reduction in costs”, explained the company.
Turnover came to 533.7 million euros, down 15.9% organically. In published data, it fell by 16.2%, including a negative currency effect of 0.3%, mainly linked to the evolution of the Chinese renminbi. Sales of its Cognac division fell by 17.5% organically, including a 14.2% drop in volumes and a negative price mix effect of 3.3%.
Its net profit fell by 24.2% organically to 92 million euros.
Significant drop in annual sales
In parallel with the presentation of its half-year results, Rémy Cointreau confirmed and quantified its annual objectives. It anticipates an organic drop in turnover of between 15% and 18% and a current operating margin (ROC or Ebit) of between 21% and 22%, on an organic basis.
“In this new framework, the bottom of the new forecast range, with organic sales down 18% and operating margins of 21%, implies an organic decline in Ebit of 28.6% and an Ebit absolute value of around 205 million euros”, calculates Jefferies.
“The top of the range, with a decline in sales of 15% and an operating margin of 22%, implies a decline in organic Ebit of 35.3% and an absolute Ebit of €224.9 million. ‘euros”, adds the broker.
At the end of October, Rémy Cointreau communicated on a “double-digit organic drop” and on an “organic deterioration” of the ROC margin “partially offset by a cost reduction plan of more than 50 million euros”.
Finally, the group took note of Mofcom’s provisional decision to apply additional customs duties of 38.1% on cognac imports into China, from October 11, 2024. “If these provisional duties were confirmed , the impact would be marginal for the 2024-25 financial year and the group would activate its action plan to mitigate the effects from 2025-26”, specified Rémy Cointreau.
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Key Points
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Spirits group born in 1724, with 12 global brands -Remy Martin and Louis XIII for cognacs, diversified into liqueurs and spirits with Cointreau, Metax, St-Rémy, Mount Gay, The Botanis, Malt Bruichladdich, Port Charlotte, Octomore, Westland, Hautes Glaces- and 2 exceptional brands – Telmont, Belle de Brillet;
– Sales of €1.2 billion distributed between 2 divisions – cognac for 65%, liqueurs and spirits for 33%, the share of partner brands having been reduced to 2%;
– International positioning, Asia-Pacific being the group’s leading market (40% of sales) in the Americas (38%);
– Ambition 2030: world No. 1 position in exceptional spirits, with a 65% share in sales, control of the sales prices of exceptional spirits, at unit prices above 50 via the strengthening of circuit control distribution (85% of sales);
– Capital controlled by the founding families (56.4% of shares and +70% of voting rights), Marie-Amélie de Leusse chairing the board of 15 directors, 15 members, Eric Vallat being general manager.
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Challenges
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– Agility of the business model:
– faced with the fall in turnover: drastic and structural reduction in costs to 45% and reduction of non-operational staff by 10%,
– restructuring of the commercial organization into 2 divisions, high level (20% of turnover) of investments and marketing approach targeted by product, customer or geographical area (France, Italy and United Kingdom in Europe, etc.),
– rise of e-commerce, to 20% of sales,
– “Sustainable Exception 2025” environmental strategy aiming for zero in 2050:
– by 2025, identification of all climate-resistant varieties, eco-design and lighter bottles,
– by 2030:
– deployment of the “New Generation Terroirs” plan: total conversion of farmers and direct wine growers to agroecology (vs. 6% at the end of March) and tightening of water management (-20% levy per liter of alcohol) ,
– full use of renewable energies and halving of CO2 emissions per bottle;
– Continued rise in profitability of liqueurs and spirits, half that of cognac which contributes 87% of operating profit;
– Solid balance sheet with €1.85 billion in equity but increase in net debt to €650 million, representing a leverage of 1.68.
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Challenges
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– Lack of visibility for the current year and strong seasonality of sales;
– Inflation in production costs partially offset by price increases and cost savings and change in the impact of euro-rimbini and euro-dollar parities, negative on 2023-24 operating profit, expected favorable for the financial year in course ;
-Redoubled mistrust of investors:
– financial year 2023-24 marked by a deterioration in the operating margin due to inventory reductions in the United States and a decline in Chinese consumption,
– risk of a response from China to European customs duties on electric vehicles which would affect European cognac;
– 2024-25 objectives: gradual recovery in sales leading to an organic increase of 6% and resilience of the gross margin;
– 2024-25 dividend of €2, payable in cash or shares – option retained by the family holding company ORPAR.
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