Rémy ‘confident’ in growth despite profit plunge5th June, 2014 by Amy Hopkins
French drinks group Rémy Cointreau has predicted a return to growth in the next year despite a massive net profit decline of 46.9% in 2013/14.
Announcing its full year financial results for 2013/14, the Rémy Martin and Mount Gay rum producer revealed that its profits totalled €80.2m, compared to €151.5m in previous year, while its sales dropped by 13.5% to €1,031 billion, compared with €1,193bn in 2012/13.
The company has experienced a number of difficulties in the past year, predominantly for its Rémy Martin Cognac, which has been hit by a widespread crackdown on extravagant spending in the Chinese market.
As such, the brand suffered a sales decline of 20.8% to €551.2m and operating profit decline of 43.9% to €125.4m due to an intentional destocking effort in China.
Adding to Rémy Cointreau’s woes in 2013/14 was the shock resignation of its CEO Frédéric Pflanz in January this year, having only taken up the role three months previously.
Meanwhile, later that same month, Patrick Piana, CEO of Rémy Cointreau’s Cognac business Rémy Martin, also left his post.
Both of these surprise departures caused the group’s credit rating to be downgraded to “negative” by Fitch Ratings. However, its shares were later driven up 11% in April this year amid rumours suggesting the company was being eyed for takeover by Brown-Forman.
Sales of the group’s Cointreau liqueur experienced a “slight decline”, however Metaxa and Mount Gay rum saw double-digit growth. Overall, Rémy Cointreau’s spirits and liqueurs sales, excluding Remy Martin, grew by 3.3% to €237.3m, but operating profit dropped 21.2% to €37.1m due to a “competitive European environment”.
Looking at the year ahead, Rémy noted that environments remained “uncertain” due to a “transforming” Chinese spirits market and a “weak” macro-economy in Western Europe.
However, it asserted its “confidence” that it will experience a return to growth in 2014/15 due to its management policies, “prudent” inventories and “resolute” pricing.
“Rémy Cointreau remains convinced of the relevance of its high value strategy and the upmarket positioning of its brands in the context of strong global demand for authentic and superior quality spirits,” a statement from the group read.
“As a result, the group will resolutely pursue its marketing investment, its creative innovations and the expansion of its distribution network, whilst maintaining strict cost control.
“All these elements make the group confident in its ability to return to profitable and steady growth in the future.”