TheChek News Flow

Rémy Cointreau Takes a Bet on China

French Drinks Maker is Convinced Chinese Billionaires Have a Taste for Top Cognac

PARIS— Rémy Cointreau SA is making a millionaire’s bet. The French drinks maker is convinced that ultra-rich Chinese will again sip from the world’s most expensive bottles of cognac following a slump in demand that stems from an anticorruption campaign by the Chinese government. The Chinese have stayed away from expensive liquor since the government banned extravagant gift-giving among officials more than a year ago.

“There are more and more millionaires and billionaires out there,” said Valérie Chapoulaud Floquet, the former L’Oréal SA executive who took over as chief executive of Rémy this autumn. “Especially the younger generation of very rich in China will still want to spend their money.”

Rémy is going against the grain of many of its competitors, such as France’s Pernod Ricard SA, which have launched cheaper drinks on the Chinese market and cut prices in the belief that the days of selling $2,000 or $3,000 bottles of cognac are over. Rémy is convinced that there will still be a niche market, where the wealthiest Chinese will buy the most exclusive brands, just more “discreetly,” according to Ms. Chapoulaud Floquet.

Ms. Chapoulaud Floquet said that Rémy is pushing the promotion of its very expensive products in private events such as dinners to a very elite and rich target group to make sure that the company is perceived as the most exclusive brand once the Chinese become more confident again about purchasing luxury items—even if that means suffering more in the short term.

“There are no signs of recovery in the market for now and no one can say with certainty when consumption will again pick up,” the chief executive said. Pernod Ricard last month said that it expects sales in the country to continue to improve gradually in the months to come.

Rémy Cointreau has been among the hardest hit by the Chinese slump as it relies for more than half of its sales and margins on its flagship Rémy Martin cognac, for which China was one of the biggest markets.

Net profit at the company fell 25% in the first half of its financial year to €64 million ($80 million) from €85.5 million as cognac sales continued to drop sharply in China.

Operating profit fell 23% to €102 million, a lower-than-expected drop as the company kept operating costs to a minimum even as sales fell 16% over the period. Shares rose 2.5% on the better-than expected numbers.

Rémy said that it still targets organic growth both in sales and operating profit in the full year. This target excludes the loss of a distribution contract in the U.S., which would have weighed on sales further.

Carlos Slim to Invest Up To $875.4 Million in Spain’s FCC

FCC Will Sell Shares at More Than 50% Discount to Market

MADRID—Two companies owned by Mexican billionaire Carlos Slim will invest up to 700 million euros ($875.4 million) in Fomento de Construcciones y Contratas SA in exchange for 25.6% of the debt-laden Spanish builder.

The deal follows months of discussions with several potential investors, including with George Soros , who had been in exclusive talks with Ms. Koplowitz as late as last week. Ms. Koplowitz will see her ownership in FCC drop to 22.4% from just over 50%.

Mr. Slim’s investment adds to the all-star cast of FCC. Late last year, Microsoft Corp. Chairman Bill Gates paid €108.5 million for a nearly 6% stake the company.

FCC, which employs 80,000 people in 56 countries, was hard hit by a six-year property slump in Spain, and has struggled to pay its debts while it strove to diversify its business into sectors other than construction.

FCC said it would sell shares in the planned capital increase at €7.50 apiece. That implies a discount of more than 50% compared with its current market price of €15.3 a share.

Over the past year, Mr. Slim, hedge fund tycoons such as Mr. Soros and John Paulson , and investor Warren Buffett , have snapped up Spanish assets at deep discounts, betting that the country is on its way to a sustained recovery after two recessions over five years. The European Commission has said it expects Spain’s economy to expand 1.2% this year and 1.7% next year.

Under the terms of the deal, Mr. Slim and Ms. Koplowitz will each name four board members. Mr. Slim has also agreed to remain as an anchor investor for at least four years.

Shares in FCC were halted earlier on Thursday pending the announcement, and will resume trade later on Thursday.

FCC plans to use proceeds from the share sale to lower its debt as part of a refinancing agreement with its creditors.

At the meeting of the Board of Directors on 27 November 2014, Jean-Bernard Lvy, who has been appointed Chairman and Chief Executive Officer of EDF, tendered his resignation to the company's directors and it was accepted.

On the proposal of the French State and Dassault Aviation, the Board of Directors has appointed M. Philippe Logak as Acting Chairman and Chief Executive Officer of Thales until the final decision is taken.

The French state, via the State Shareholdings Agency (APE), holds 26.39% of the Thales Groups capital. Dassault Aviation holds 25.3%.

- EU will need to see information on the execution of the 2014 budget which will only be available at the end of March

Face au discours de prospective décliniste de l'essayste Jéremy Rifkin sur les effets d'Internet sur le capitalisme, Jacques Attali; Jean-Marc Daniel et la présidente de GE France y voient plutôt un vecteur de croissance pour les entreprises, positif ou... négatif.

En visio-conférence, mardi 25 novembre, lors d'une conférence sur le thème "Internet va-t-il tuer le capitalisme ?" organisée par l'institut G9+, Jeremy Rifkin a prédit l'avènement d'une troisième révolution industrielle due notamment au développement exponentiel de l'Internet des objets, vers la fin du capitalisme. Combiné à de nouvelles formes d'énergie, de transport et de logistique, il ferait passer l'économie de marché à une économie du partage et de la mutualisation, rendant le coût marginal des services proche de zéro. Pour illustrer ses propos, il met en avant l'Internet de l'énergie aidant à l'exploitation des ressources inépuisables du soleil "qui n'envoie pas sa facture".

Une valeur qui dépend des informations et de l'intelligence

Les trois Français, quant à eux, voient un système capitaliste qui s'adaptera et jouira de nouvelles opportunités avec l'Internet des objets. Clara Gaymard, timorée lorsqu'il s'agit de parler de l'avenir "dont on ne sait rien", se focalise sur le présent, avec un discours empreint de ses expériences vécues dans GE: "Aujourd'hui, la valeur ajoutée ne dépend pas seulement de la production mais de plus en plus des informations et de l'intelligence qu'il y a autour. On est passé à une économie de partage des connaissances".

Ainsi, avec le développement du big data, ceux "qui contrôleront les données et sauront les utiliser détiendront la valeur ajoutée". Une référence aux Gafa, les quatre géants du web: Google, Apple, Facebook et Amazon. Concrètement, pour Clara Gaymard, "la combinaison du big data avec l'imprimante 3D et la robotique conduit à des accélérations au sein des entreprises industrielles".

Vecteur de forte concurrence

Clara Gaymard appelle par ailleurs à renverser la tendance d'une "information qui part dans la Silicon Valley avec des bénéfices énormes à la clé, et quitte parallèlement l'Europe, qui perd ainsi un vecteur de valeur ajoutée. Et de positiver toutefois, laissant présager d'un avenir plus rose:

"On a su conserver des clusters (concentration d'entreprises indépendantes) avec des ingénieurs qu'on nous envie dans le monde entier. [...} Dans les salons dédiés au digital comme celui de Seattle, les Etat-Unis sont les plus présents. La France arrive 2e largement devant Allemagne."

Pour Jean-Marc Daniel, l'Internet et l'accès au Big Data sont des portes ouvertes à la concurrence dans l'éducation par exemple (avec les moocs, cours en ligne). A condition notamment que le monopole de Google soit brisé. Cela permettrait le développement d'"une concurrence saine" nécessaire au bon fonctionnement des rouages capitalistes, selon lui. D'après le directeur de l'ESCP, la santé pourrait également être soumise à une concurrence accrue offrant de nombreuses opportunités. Par exemple, "avec le développement Internet combiné à celui de l'automatisation,'on pourra opérer de New York quelqu'un situé à Paris'."

L'Internet des objets, nouvelle forme de "dictature"

Internet "invente autrement le capitalisme", assure Jacques Attali, au cours d'un discours bref mais dense. S'il pourfend la vision décliniste de Jéremy Rifkin annonçant la fin du capitalisme et l'Internet de objets comme pilier de l'économie, l'économiste porte également une vision sombre. Il voit dans l'Internet des objets, une "tentative de prise de contrôle de nos vies".

"Les maîtres de demain seront les agrégateurs de données et les compagnies d'assurance. Nous offrons nos données gratuitement, en échange on accède à Google. On donne à ceux qui vont agréger nos propres données pour nous les revendre sous forme de prime d'assurance."

Et d'ajouter: "On va nous amener à nous surveiller nous-mêmes, notamment dans la santé. Avec les capteurs associés à nos données, on nous dira si l'on adopte les bons comportements pour perdre du poids, etc."

Dans un élan lyrique, il n'hésite pas à conclure en comparant cette mainmise sur le bigdata à une nouvelle "forme de dictature".

India is unlikely to launch an appeal against the recent Rs30bn ($490m) tax victory won by British telecoms group Vodafone, in a sign that Prime Minister Narendra Modi is shedding his government’s image for aggressively targeting the taxation affairs of foreign businesses.

India’s attorney general has recommended against an appeal to the country’s supreme court, following Vodafone's victory in a ruling from the Bombay high court last month, three people familiar with the situation confirmed.

If India’s cabinet agrees with the recommendation, it will signal a further softening of the country’s traditional policy of doggedly pursuing similar tax cases, which Mr Modi's centre-right Bharatiya Janata party once criticised as “tax terrorism”.

It would also provide a welcome signal to Anglo-Dutch oil group Shell, which won a similar victory in a $3bn ruling earlier this month, that the government was unlikely to launch a supreme court appeal in its own case..

Numerous other global businesses including US-based technology group IBM and British energy explorer Cairn, have found themselves caught in a range of typically lengthy and complex tax rows with New Delhi.

Vodafone won its appeal in October in a case relating to “transfer pricing” – the way that global organisations account for services provided by local subsidiaries to divisions in other countries. The area has been the cause of numerous disputes in India.

India’s previous government had typically launched appeals in similar cases, a policy supported by revenue officials. But Mukul Rohatgi, India’s attorney general, said he had recommended against an appeal in Vodafone’s case.

“I have asked the income department to accept the judgement of the high court. I have said in my opinion don’t file an appeal,” Mr Rohatgi said, according to Press Trust of India, a local wire news service.

Although the change of heart may now face resistance from India’s revenue service, the signal was welcomed by tax analysts, who said it showed that Mr Modi had understood that frequent tax battles had damaged India's reputation as an investment destination.

“This is very good news, given the ordinary tendency is to appeal high court decisions,” said Mukesh Butani, the tax practice leader at BMR Advisors, an India-based professional services group.

“The new leadership clearly wants to create a non-adversarial tax environment, and so I would expect Shell and others to benefit from similar treatment, given the principles in their cases are identical to Vodafone.”

Vodafone’s victory last month has no bearing on another long-running $2.6bn case relating to its 2007 acquisition of an Indian telecom group, perhaps the most celebrated corporate taxation battle in recent Indian history. The case is awaiting international arbitration.

Mr Modi disappointed investors earlier this year by refusing to repeal a 2012 tax law change that allowed his government to reopen old tax disputes retrospectively, a measure that could have ended Vodafone’s dispute.

Full text: {https://www.ecb.europa.eu/press/key/date/2014/html/sp141127.en.html }

FULL TEXT

Visit of the President of the European Central Bank to the Finnish parliament

Introductory remarks by Mario Draghi, President of the ECB,

Helsinki, 27 November 2014

***

Summary

In his speech at the Finnish Parliament the President highlighted that, over the past crisis years, the ECB has acted forcefully to safeguard price stability and to contribute to financial stability in the euro area as a whole.

In particular, the ECB has taken several non-standard measures to ensure the transmission of its monetary policy to the economy. The latest unconventional measures announced by the ECB (the targeted long term refinancing operations (TLTROs), and the covered bond and ABS purchase programmes) will have a sizeable impact on our balance sheet, which we expect to move towards its early 2012 dimension. This will ensure the necessary degree of monetary accommodation and contribute to a gradual recovery and a return of inflation to levels closer to below, but close to, 2%. If, however, it becomes necessary to further address risks of too prolonged a period of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate.

Accountability and transparency are the essential elements balancing the independence of a central bank, especially in times where unconventional measures are being taken. The ECB regularly publishes a variety of data on the execution of monetary policy operations and the liquidity conditions of the Eurosystem. (i.e. the SMP, the Covered Bonds Programmes and the ABS Purchase Programme portfolios). Additionally, the Governing Council committed to the publication of an account of monetary policy discussions.

As regards fiscal policy and structural reforms, while the Stability and Growth Pact should remain the anchor for confidence in sustainable public finances, a comprehensive strategy is needed to put the euro area economy back on track. This involves further sharing of sovereignty, i.e a leap forward from common rules to common institutions. The upcoming report commissioned by the Euro Summit on the future of economic governance will present a good starting point for further reflection.

***

Honourable Members of Parliament,

Ladies and Gentlemen,

I would like to thank you warmly for having invited me to address you today. This is a good opportunity for me to explain the policies of the European Central Bank (ECB) and to listen to your concerns and questions. I am looking forward to a fruitful exchange of views today.

To lay the ground for our discussion, I will focus on three topics: the ECB’s monetary policy (even though I will not elaborate on possible upcoming measures as we are in the so-called “quiet” period during which members of the Governing Council are expected to remain silent on this issue), the ECB’s accountability framework and transparency, and the progress towards building a deeper economic and monetary union (EMU).

Economic and monetary developments

Let me first turn to economic developments in the euro area.

We have seen a weakening in the euro area’s growth momentum over the summer and the euro area economic outlook is surrounded by a number of downside risks. Also, most recent forecasts by private and public sector institutions have been revised downwards. Our expectation for a moderate recovery in the next years still remains in place, reflecting our monetary policy measures, the ongoing improvements in financial conditions, and the progress made vis-à-vis structural reforms and fiscal consolidation. But the recovery will likely be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments.

Inflation in the euro area remains very low, standing at 0.4% in October. In the light of the recent sharp fall in oil prices, and taking into account prevailing futures prices for energy, inflation is expected to remain at around current low levels over the coming months, before increasing gradually during 2015 and 2016.

Meanwhile, we are facing continuously sluggish money and credit dynamics – even if the growth rates of some key aggregates have edged up in recent months.

Monetary policy in crisis times

During the past crisis years, the ECB has acted forcefully to safeguard price stability and to contribute to financial stability in the euro area as a whole. In particular, we have taken several non-standard measures to ensure the transmission of our monetary policy to the economy. We provided the euro area banking system with unprecedented funding, including the full allotment - at fixed rates - of banks’ demand for liquidity. We also communicated our readiness to undertake Outright Monetary Transactions with a view towards restoring the monetary transmission mechanism which was impaired by distress in sovereign bond markets. While these measures have been successful in improving banks’ access to private credit and countering financial fragmentation, broader financing conditions – foremost the cost of borrowing from banks – have been exceptionally sluggish in responding to the monetary policy accommodation that was introduced. As a consequence, monetary and credit dynamics have followed a protracted, negative trend until very recently. Against this backdrop, and in view of a persistently weak inflation outlook, we decided in June and then in September to adopt a number of monetary policy measures. With these monetary policy decisions, we have moved from a monetary policy framework based predominantly on passive provision of liquidity to a more active and controlled management of our balance sheet.

In September, we cut the key ECB interest rates to their lower bound. The main refinancing rate now stands at 0.05%, and the deposit facility rate at -0.20%.

We also announced further measures to support lending and materially ease credit conditions for households and non-financial businesses.

These measures include the targeted longer-term refinancing operations (TLTROs), which we started to implement in September. These operations allow banks to borrow from the Eurosystem at very attractive conditions over a period of up to four years, provided that they meet certain conditions regarding their lending to the private non-financial sector (excluding loans to households for house purchases).

Moreover, last week we started to purchase simple and transparent asset-backed securities under our ABS purchase programme (ABSPP). Purchases will be restricted to senior and – down the line – guaranteed mezzanine tranches. Due to the stringent quality criteria for eligibility demanded of the underlying loans, and the considerable amount of credit enhancement which is built into the securitisations qualifying for the programme, the additional risk exposure which the Eurosystem will acquire under the ABSPP will remain limited.

We have also already started purchasing covered bonds issued by euro area banks under our new covered bond purchase programme (CBPP3).

These measures will enhance the transmission of monetary policy, support the provision of credit to the euro area economy and, as a result, ease our monetary policy stance more broadly. They will also have a sizeable impact on our balance sheet, which we expect to move towards its early 2012 dimension. This will ensure the necessary degree of monetary accommodation which will effectively contribute to a gradual recovery and a return of inflation to levels closer to our aim of below, but close to, 2%.

We already have indications that this credit easing package is delivering tangible benefits, but time is needed for the positive effects to fully materialise.

However, should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate. In this context, we have also tasked relevant ECB staff and Eurosystem committees with the timely preparation of further measures to be implemented, if needed.

The ECB’s accountability framework and transparency

Throughout the crisis, the ECB has undertaken a series of measures to pursue its mandate of price stability, including unconventional measures such as the ones just described. To carry out its tasks, the ECB enjoys a high degree of independence under the EU treaties.

This independence manifests itself in a number of institutional features of the Eurosystem. Let’s take collegiality: the Eurosystem’s main decision-making bodies (the Executive Board and the Governing Council) both work in a collegiate way, as it is absolutely essential to take decisions which reflect the wisdom and expertise of all members. For example, I have now worked for many years with Governor Liikanen in the Governing Council and really treasure his input into the discussions. Like the other governors, he is not there as a delegate of his country but contributes with his expertise, knowledge and the work of Suomen Pankki - Finlands Bank so that the best decision is taken for the euro area as a whole. National central banks (NCBs) play a crucial role in the functioning of the Eurosystem. NCBs’ tasks range from the research and analysis which feed into the decision-making process to implementing monetary policy decisions, the collection and production of statistics, and the operational aspects of payment systems and banknotes. Their role cannot be overplayed.

As an independent central bank, the ECB is committed to being fully accountable to citizens and their elected representatives and has an established framework to discharge accountability to the European Parliament. This includes, most importantly, the hearings of its Committee on Economic and Monetary Affairs (ECON), as well as an array of further channels for interacting with the European Parliament.

As regards national parliaments, Finlands Bank is accountable to your parliament, and I understand that the Parliamentary Supervisory Council is provided with information on monetary policy regularly to exercise its prerogatives. In addition, our accountability towards the European Parliament does not exclude that there are also a number ad hoc interactions with national parliaments, such as today’s meeting.

But accountability would not be meaningful without an appropriate degree of transparency, to which the ECB is also strongly committed.

In general, the ECB’s commitment to transparency has increased over the years. The ECB regularly publishes a variety of data on the execution of monetary policy operations and the liquidity conditions of the Eurosystem. The most recent examples include the weekly publication of the value of all monetary policy portfolios, i.e. the Securities Markets Programme (SMP), the covered bond purchase programmes and the ABS purchase programme.

Transparency is key, especially in times where unconventional measures are being taken. This is why the Governing Council committed to the publication of an account of its monetary policy discussions.

The future of EMU governance

Finally, let me turn to the governance of Economic and Monetary Union. In the short run, our overarching focus should be on the full and consistent implementation of the existing fiscal and macroeconomic surveillance framework. This is key to bringing down high public debt ratios, to raising potential growth and to increasing the resilience of the euro area economy to shocks. Now is certainly not the right moment for complacency, neither in the area of fiscal policies nor with regard to structural reforms. It should be clear that monetary policy alone cannot do all the “heavy lifting”. All policy actors – both at the national and the European level – need to do their part. This should be embedded in a comprehensive strategy that puts the euro area economy back on track.

The Stability and Growth Pact should remain the anchor for confidence in sustainable public finances – throughout the procedural steps under the agreed framework. With regard to macroeconomic surveillance, the implementation of structural reforms is imperative and should be a matter of priority for the euro area governments.

In the medium to long term, we need to explore various options to further ensure a smooth functioning of EMU. During the crisis, euro area Member States – including Finland – have made a significant effort in terms of strengthening both discipline and solidarity within EMU. While this has contributed decisively to overcoming the crisis, I believe that this is not yet fully commensurate with the long-term necessities of being part of a monetary union. In the euro area, economic policy choices are so interdependent that, ultimately, sovereignty over economic policy-making should be exercised jointly. Therefore, we need, in my view, to further share sovereignty in this realm. This could translate into a leap forward from common rules to common institutions. The forthcoming report that the Euro Summit has commissioned on the future of economic governance will present a good starting point for further reflection on these matters.

I am here today to represent the ECB and am looking forward to a constructive exchange of views. Therefore, I very much welcome your questions.

Shares in Japan’s Yakult fell as much as 10 per cent following a report that France’s Danone was considering unloading its 20 per cent stake in yoghurt drinks maker.

The alliance between the two companies – dating back to 2004 – had been strained since last year after Yakult executives expressed opposition to Danone’s move to to increase its stake in the company.

The two companies called off their strategic tie-up last April, with Sumiya Hori, Yakult’s chief executive, citing “differences in corporate culture”.

Yakult shares dropped 10 per cent in early Tokyo trading, erasing the gains it had made after boosting its annual profit outlook on November 7 on the back of strong sales in China and other parts of Asia. Yakult stock closed down 6 per cent at Y6,290 on Thursday.

The fall came after Bloomberg reported that Danone had held internal discussions about a possible sale of its Yakult stake worth almost $2bn.

Both Danone and Yakult declined to comment.

Market players said the potential sale, if true, was not totally unexpected, given that relations between the two companies had soured.

“The two firms had talked about their collaboration, but there seems to have been little merit from the alliance,” said Tomohiko Ikeno, an analyst at Ace Research Institute. He added that the relationship between the two companies had always been akin to “a black box”, as Yakult had been tight-lipped about its ties with Danone.

“Yakult’s business in China and other parts of Asia is doing very well so Danone’s exit is unlikely to affect its overseas strategy,” said Mr Ikeno.

When Yakult and Danone ended their tie-up last year, Mr Hori called the move “a new step forward” and said it would strengthen the company’s “management independence”.

Yakult’s efforts to expand outside of its shrinking home market has been led by a door-to-door sales force of red uniform-clad female workers, who wheel around pushcarts carrying Yakult’s probiotic yoghurt drinks.

While a bigger stake in Yakult may have given Danone more access to the Japanese maker’s extensive networks in Asia, the world’s largest dairy producer has already expanded its presence in the region.

Danone booked stronger-than-expected third-quarter revenues on strong sales of infant formula sales in Asia. Last month, the company also pushed further into China’s dairy market with a $550m investment in Yashili, the infant formula provider.

{http://www.thetimes.co.uk/tto/business/industries/health/article4279546.ece}