Jean-Marie Laborde, chief executive of the French spirits group, said on Tuesday: “I can confirm that the start of the year is soft in China . . . We expect a lacklustre first half in China and its impact will be felt by the company.”
Mr Laborde was speaking as the Paris-based group reported an 18 per cent rise in full-year net profit to €130m in its financial year to end-March – slightly below analysts’ expectations.
Sales of €1.2bn were 16 per cent higher than in the same period the year before, or 9 per cent higher on a like-for-like basis.
Sales to China in the first half of the year were 40 per cent higher than in the same period of the previous year.
Mr Laborde said there had been a sharp slowdown in Chinese demand over the past six months in restaurants and bars for its most prestigious cognacs, including Louis XIII, which retails from about $2,500 a bottle and is often consumed by high-ranking Chinese officials.
Demand from younger Chinese drinkers, who drink less expensive cognac, remained robust, he said. Wholesalers’ cognac inventory levels in China were high after the weaker-than-expected lunar new year, he said, and would take time to run down. He was confident about the medium-term growth outlook for premium spirits.
Premium drinks companies and luxury goods groups have almost all been hit by the country’s economic slowdown and by the new Chinese government’s austerity campaign, which has led to the giving of less expensive gifts and lower spending by state officials.
Rémy, controlled by the Hériard Dubreuil family, makes 40 per cent of its operating profits from cognac sales in China, but said the slowdown was cyclical, not structural.
“Our good results today are, among other things, due to having anticipated the recovery in the US,” said François Hériard Dubreuil, chairman,
Mr Laborde said Rémy was raising its presence and investment in Africa, initially focused on a handful of countries, including South Africa and Nigeria, which he said was a promising market.
Rémy also took an impairment charge of €15.9m on the value of its 27 per cent stake in Dynasty Fine Wines, the listed Chinese group. Dynasty, which warned in February that it made a loss in 2012 but has yet to publish its results, is valued at €43m in Rémy’s accounts.
Last month, Pernod Ricard, France’s largest spirits group by sales and maker of Martell cognac, also forecast weaker sales growth in China due to the country’s economic slowdown.