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Strong Cognac performance boosts Remy

The single-mindedness with which Rémy Cointreau has been pursuing the lucrative Asian markets is paying off.

In the year to the end of March, turnover of Rémy Martin Cognacs rose by 12.1% to €486 million. That represented a 20.3% increase in organic growth in current operating profit, fuelled largely by growth in demand for premium Cognacs in the Far East, which is now Rémy Martin’s largest market. Operating margins on Cognac are now almost 29%.

Overall the group’s turnover rose by 12.4% to €904m. Operating profit rose by 17.6% but after excluding exceptional items, it ended the year 8% ahead on a like-for-like basis, which was roughly in line with the company’s guidance.

The group’s total sales rose by 12.4%. Significantly, while organic turnover rose by 6.4% in the year, margins rose from 17.6% to 18.4% despite a significant increase in marketing spend during the year.

The results created little interest in the shares, which slipped marginally in Paris, but investors were positive about several aspects of the company’s statement, not least the planned ordinary dividend of €1.30 per share plus an extraordinary cash dividend of €1.

Not everything is positive, however. While Cointreau and Mount Gay rum both grew sales, the liqueurs and spirits division was hit by the continuing plight of Metaxa, which is ailing as the Greek economy sinks deeper into the mire. The division’s operating profit fell by 17.4%.

There was better news of the Champagne division, which Rémy Cointreau sold last week to EPI for just over €400m. In the year to the end of March, Champagne sales grew by 4.6% to generate an operating profit of €2.8m compared with a loss of €4m in the previous 12 months. Rémy Cointreau will continue to distribute Piper and Charles Hiedsieck for EPI, which is expected to invest further in the brands, with a concomitant benefit to Rémy’s results.

The group’s emphasis remains on consolidating and extending the progress it has made over the past few years through increasing margins via price increases and encouraging consumers to trade up the range, especially of Cognacs. But it did not go unnoticed that after debt restructuring and the additional proceeds of the Champagne sale in the kitty, Rémy Cointreau has the resources to hit the acquisition trail.

The fact that net debt has been cut by 34% and that the ratio of debt to earnings is down to a slim 2.19 times even before the Champagne sale proceeds are counted, means that Rémy’s balance sheet is now looking very solid compared with a few years ago.

Indeed, the company concluded its results statement by saying that it will “look closely at other growth opportunities should they present themselves”. That implies that Rémy Cointreau intends to be a player in the next round of industry consolidation.

Finance on Friday, 10.06.2011

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