Remy restructuring for future growth

At the end of March Rémy Cointreau will take full control of its distribution and 80% of its international sales when it leaves the Maxxium consortium. This will mark the end of a period of transition designed to make the French group more profitable, but which is coming to fruition just as the global market is facing more difficulties than for a generation.

Back in November, Rémy chief executive Jean-Marie Laborde warned that the company had not faced a tangible slowdown but predicted that it would. Yesterday Rémy released nine-month figures that supported his prediction. It said that destocking by wholesalers and the costs incurred with the reorganisation of its distribution network would cut its full-year recurring operating profit by about 15%, but that these effects would have a “significantly lower impact” on its full-year net profit, which is expected to fall following four years of steady progress. Much of the decline, however, will be associated with the one-off costs of leaving Maxxium.

It is worth noting that the half-year net profits to the end of September were 27% ahead and that at the nine-month stage the group’s own brands achieved organic growth of 0.9%, so M. Laborde has a cushion in his back pocket with which to offset the effects of a weaker second half year. Nor should it be forgotten that at the same time Rémy Cointreau has been deliberately pushing through price rises as well as successfully moving customers up its range to premium and more profitable styles: the same strategy that has proved successful for Diageo and Pernod Ricard.

Overall in the nine months to the end of December group sales fell by 4.2% to €604m but encouragingly cognac grew by 0.7% while champagne sales, largely the Piper-Heidsieck and Charles Heidsieck marques, did better than the industry average by losing just 6.5% as sales to the US suffered in the run up to Christmas.

Overall in the first nine months of its fiscal year Rémy Cointreau suffered from destocking by wholesalers in the US and Russia, but this was offset by extra business in the Chinese and South-East Asian markets. Indeed, the ability to focus on expanding demand in these burgeoning markets was a key factor in Rémy’s strategy of taking its sales and distribution back into its own control.

There is an advantage, however, in completing such a large restructuring while the global market is in turmoil. The company is leaner, the costs are known and the group will have an uncluttered balance sheet ready to resume what it hopes will be a rapid return to organic growth, returning to the positive pattern established over the past four years.

Finance on Friday, 23.01.09