(Updated with stock market reaction and analyst comments)
PARIS, October 27 (Reuters) – Rémy Cointreau lowered its outlook for its 2023-2024 financial year on Friday due to the deterioration of market conditions, particularly in the United States, which weighed on its turnover in the second quarter.
On the Paris Stock Exchange, the spirits group’s action fell 10.01% to 106.05 euros in early trading, its biggest drop in session since April. The value drags down competitor Pernod Ricard, which loses 1.66%.
“The lowering of the forecast is not a surprise but the scale of the reduction is much greater than expected – this was done with a machete and not a scapel,” commented Bernstein analysts in a note.
Rémy Cointreau now forecasts a decline in organic revenue of between 15% and 20% for its 2023-2024 financial year, compared to a previously forecast of stable revenue.
He is also aiming for a “controlled” decline in the current operating margin in organic data, whereas he previously saw it stable.
In the United States, market conditions have deteriorated with the persistence of a highly promotional environment and the rise in interest rates which impacts the financing capacities of distributors, explains Rémy Cointreau.
As a result, the resumption of sales growth, which was initially expected in the third quarter, is now expected during the 2024-2025 financial year which begins on April 1.
In China, sales growth will be lower than expected given the country’s difficult economic recovery from the COVID-19 pandemic.
The EMEA region should experience moderate annual growth in a persistent inflationary context, adds Rémy Cointreau.
In the second quarter, the group recorded a 10.8% decline in its turnover on an organic basis, bringing the decline over the entire first half to 22.2%.
“The year 2023-24 marks for the group as a year which will allow it to clean up the level of its cognac stocks in the United States and absorb the effects of post-Covid normalization in order to approach the year 2024-25 in the best conditions and resume the trajectory it has set for 2029-30″, indicated Rémy Cointreau in a press release.
The group has thus confirmed its financial objectives for this horizon with an expected current operating margin of 33%.
“The value will undoubtedly fall sharply today and the valuation appears increasingly attractive but until there are signs of improvement in the underlying trends for cognac in the United States, this is of no use”, underline the Bernstein analysts.
(Written by Blandine Hénault, edited by Kate Entringer)
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