Rémy Cointreau, the French spirits group, said it would return to growth during the next business year even as plummeting sales in China produced a brutal drop in operating profit last year.
The Paris-based maker of ultra-premium cognacs such as Louis XIII said that operating profit fell 38.8 per cent in the year to the end of March compared with the previous 12 months.
The group also said that it would cut its dividend 9.3 per cent from last year to €1.27 per share.
The fall in operating profit, which was expected after the group published weak sales figures in April, was nonetheless at the bottom of the range of its own forecasts. Rémy shares on the Paris stock market fell 3 per cent in early-morning trading before climbing 1.2 per cent to €68.42 by mid morning.
Like its competitors, Rémy Cointreau has suffered a marked change of fortune in China as the government continues to crack down on so-called “conspicuous spending” on luxury products by its officials.
But the policy U-turn has affected Rémy more than most both because of the group’s greater exposure to China as well as to the fact that its sales have been more concentrated in the premium segment of the Chinese spirits market that was in such demand until 2012.
Until the crackdown, the ultra-premium cognac category, which starts at $500 a bottle, accounted for 13 per cent of the Chinese market compared with less than 1 per cent for the UK or the US, according to Bernstein Research.
Cognac makes up about 80 per cent of Rémy’s total operating profit, with China accounting for half of that. Operating profit at Rémy Martin, the cognac division, was €125.4m to the end of March, a fall of 43.9 per cent compared with the 2012-13 business year.
But on Thursday, Luca Marotta, Rémy’s chief financial officer, expressed optimism about a turnround. “2014-15 will be a growth year [on an organic basis],” he told analysts on a conference call.
The company said that while spirits sales motivated by the deeply rooted culture of gift-giving in China had suffered under the policy change, consumption in bars and restaurants had held up and consumption at home had increased.
“I am optimistic about the medium term,” Mr Marotta said about the Chinese market.
The group said that operating profit fell to €150.2m over the 12 months to the end of March compared with €245.4m during the preceding business year. The figure was 14.6 per cent of sales compared with 20.6 per cent previously.
It also said that net debt at the end of the financial year was €413.5m, an increase of €148m compared with 12 months before.