Paris (AFP) – French drinks group Remy Cointreau lifted Friday its outlook for the year after a deal between the EU and China on cognac imports, but now expects a stiffer impact from US levies and the strong euro. The group, which makes Remy Martin and Louis XIII cognac as well as Cointreau orange liqueur, now targets a mid-to-high-single-digits decline in adjusted operating profit for its 2025-2026 financial year, compared with the mid-to-high-teens decline previously forecasted.
A major reason behind the improvement is the agreement earlier this month by European brandy exporters to raise prices in China to avoid anti-dumping duties, ending temporary measures that were costing French cognac makers 50 million euros per month. Remy Cointreau now expects a hit of 10 million euros ($11.8 million) from Chinese measures this year, as opposed to the 40 million euros previously.
But the company raised its forecast for the impact of US tariffs to 35 million euros, from 25 million previously. The European Union is scrambling to secure a trade deal with the United States before August 1, when Washington has threatened to hike baseline tariffs from 10 to 30 percent.
The company maintained its forecast of a return to mid-single-digit sales growth stripping out currency changes for 2025-2026, but noted this was primarily due to a rebound from a low comparison base in the United States. Sales rose by 1.8 percent in the April to June quarter to 220.8 billion euros. The gain was 5.7 percent stripping out exchange rate fluctuations and other changes to the business.
Quarterly sales in the United States rose from a low base, while they edged lower in Asia due to the Chinese levies and fell in Europe, the Middle East, and Africa due to heightened competition and sluggish demand. The strong value of the euro — it has climbed more than 13 percent against the dollar since the start of the year — has been weighing upon the results of European companies when they convert foreign sales back into euros.
Remy Cointreau said it now expects a negative currency effect impact on sales of between 50 and 60 million euros for its 2025-2026 financial year, up from its earlier estimate of 30 to 35 million euros. It also raised the currency effect impact on adjusted operating profit to between 15 and 20 million euros, compared to 10 to 15 million euros previously.
Remy Cointreau’s shares jumped around four percent as trading got underway in Paris, while the blue-chip CAC 40 index fell 0.7 percent.
© 2024 AFP
