French spirits maker Rémy Cointreau posted a slightly smaller-than-expected decline in third quarter sales, helped by a sequential improvement in the United States and major de-stocking in China ahead of the Chinese New Year.
The company reiterated that it did not expect sales to return to growth in the US before financial year 2024/25, and that sales growth would be tempered by a slower than expected economic recovery in post-pandemic China.
Destocking In China
Remy had already flagged sharp destocking in the country in the quarter ahead of the Chinese New Year in February, which chief financial officer Luca Marotta said was temporary.
However, he added that underlying performance in the United States and China - the group's two key markets for coganc - was close to Remy's most cautious scenario.
Jefferies analyst Edward Mundy said in a note that "key questions" remained about the duration of destocking in China and a return to normality in the United States, but the improvement and reiteration of guidance was well-received.
The company said its sales dropped by 23.5% on an organic basis to €319.9 million ($346.7 million) in the third quarter, which covers the important Christmas season, ahead of analysts' expectations of €318.6 million in a company-compiled consensus.
Its Europe, Middle East and Africa (EMEA) region saw a sharp decline in the quarter due to a combined impact of unfavourable phasing and inflation curbing consumption. Remy said annual sales growth in the region would also be moderated by the persistently high inflation.
Sales of cognac, which makes up a large portion of Remy's revenue, were down 33.9% in the quarter at €197.1 million, versus €194.0 million expected by analysts.
Rémy's Liqueurs & Spirits division reported quarterly organic growth of 4.3%, driven by good momentum and positive phasing effect in the United States.