Rémy Cointreau predicts 30% profit slump

French drinks group Rémy Cointreau has predicted that its operating profit will fall by 25% to 30% in the 2019/20 fiscal year due to the impact of coronavirus.

The company released initial details of the impact of coronavirus yesterday (2 April). It revealed that its revenue for the 2019/20 fiscal year ending March 2020 was down by 12% in organic terms, caused by a 26% downturn in sales in the fourth quarter of the year despite “excellent” performance at the start of the Chinese New Year.

While the figures are stark, the group said it was witnessing some improvement in greater China, with most shops reopening as well as some restaurants and bars.

However, it said that it would take several months for Chinese wholesalers to de-stock before they need to start replenishing once more.

As a result of this, and the collapse of the global travel retail market and the on-trade in other countries, Rémy Cointreau estimates that its organic sales will fall by a greater margin in the first quarter of the 2020/21 fiscal year, than they did in the fourth quarter of 2019/20.

Despite this, the drinks group said it remained “confident” about its ability to survive the crisis and that it would “emerge from it even stronger, overtime”.

The drinks group has been active in helping to fight the spread of coronavirus. In China, it donated 1 million yuan to the Shanghai Soong Ching Ling foundation for the purchase of protective medical equipment in February. It then donated a further 200,000 yuan, sourced from donations by its Chinese collaborators and a matching amount paid by the group.

In France it has converted production sites in Cognac (Rémy Martin), Angers (Cointreau) and Triève (Distillery of the Domaine des Hautes Glaces) into neutral alcohol producing plants for health organisations, with the output to be used in sanitisers. It also gave 8,000 surgical and FFP2 masks to hospitals in Cognac and Saintes.

Other sites around the world including its Bruichladdich distillery on Islay, Westland distillery in Seattle, and Mount Gay Rum in Barbados are also helping the hand sanitiser production effort.

The news follows similar predictions from fellow French drinks company Pernod Ricard, which also said that the Covid-19 outbreak would have “widespread repercussions” on its business. Pernod Ricard expects its operating profit to fall by 20% in FY20, having initially predicted that the virus could cause just a 2% fall in its FY2020 sales.