Rémy Cointreau SA said on Thursday that it expects revenue and operating profit to start growing again in the year ahead after net profit by fell more than half in the previous year as sales of the French company's brandy slumped in China.
Rémy Cointreau said net profit fell 52% to EUR62.4 million ($84.89 million) in the year to end-March as a crackdown on corruption in China led to a sharp decline in demand for cognac that has chilled the entire industry for the past year.
Rémy Cointreau, best known for its Rémy Martin cognac, has been among those hardest hit by Chinese President Xi Jinping's anticorruption drive. The move has undermined the long-standing tradition of gift-giving and fancy dining which had previously propelled sales of Rémy's pricey cognacs.
Sales in the full year fell to EUR1.03 billion, a 11% drop on a comparable basis, which strips out the impact of exchange rates, acquisitions and disposals.
Operating profit fell 39% to EUR150.2 million, at the high end of the range of the company's lowered profit expectations for the period. Rémy Cointreau had said operating profit would fall 35% to 40% in the financial year just ended, as the group focused on reducing its high inventory levels in China and continues to invest in the marketing and distribution of its brands to be ready for when growth eventually picks up.
Rémy Cointreau said for the financial year ending in March 2015, the group expects a return to underlying sales growth and growth in operating profit with one caveat. The target excludes the impact of the loss of its distribution contract for Edrington's Scotch whisky brands in the U.S. It declined to say what the financial impact of that contract loss would be.
