Remy Sales Fall 2.5% on Dropped Distribution Accords

Remy Cointreau SA, France's second- largest liquor company, said first-half sales fell 2.5 percent, less than analysts expected, after ending contracts to distribute lower-priced beverages.

Revenue dropped to 365.2 million euros ($489 million) in the six months through September from 374.5 million euros a year earlier, the Paris-based company said today in a statement. That beat the 360.9 million-euro median estimate of five analysts surveyed by Bloomberg.

The distiller is emphasizing Remy Martin cognac and other premium spirits to bolster margins and taking more control over Asian distribution. It faces lower consumer confidence as the global credit crunch roils financial markets and companies cut jobs. Weaker U.S. spirits demand was one reason cited last week by LVMH Moet Hennessy Louis Vuitton SA for a slowdown in sales.

"The figures are better than expected," said Laetitia Delaye, an analyst at Kepler Capital Markets in Paris who has a "buy" recommendation on the stock. "Their new distribution network is beginning to bear fruit."

Sales rose 4.6 percent excluding currency movements, takeovers and disposals, beating the survey's 2.7 percent estimate. The distiller stuck to a forecast for stagnant operating profit in the current financial year when exchange rates, acquisitions and disposals are excluded.

Stock Drops

Remy rose 65 cents, or 2.4 percent, to 27.49 euros at 12:54 p.m. in Paris trading while the benchmark CAC 40 Index lost 2.9 percent on concern that the global economy is heading into a recession. The stock has slid 44 percent this year, more than the 42 percent retreat by Pernod Ricard SA, whose Martell cognac competes with Remy Martin.

First-half sales rose 1.6 percent to 170.2 million euros at Remy's cognac unit, the main contributor. Excluding currency movements, they climbed 11 percent.

"Growth of Remy Martin, which benefited from significant price increases, was confirmed in the second quarter despite the slowdown in the U.S.," the company said. "The very-top-of-the- range cognacs continued to achieve strong growth in the Chinese market and performed well in Europe."

Revenue fell 4.1 percent to 97.8 million euros at the liqueurs and spirits division and was unchanged when excluding exchange-rate movements. Champagne sales climbed 1.9 percent to 61.4 million euros on stronger demand for the Piper-Heidsieck and Charles Heidsieck brands in Europe and Asia and gained 6.5 percent not including currency movements and disposals.

Revenue from distribution of so-called partner brands fell 20 percent to 35.8 million euros after Remy stopped distributing Russian Standard vodka.

Maxxium

The distiller also said it will sell its 25 percent stake in the Maxxium distribution joint venture in March for 60.4 million euros. Remy is quitting the group that month at a cost of 224 million euros in penalties to gain more control over Asian beverage shipments as growing economies fuel demand for imported spirits.

Maxxium will be shut down in 2009 because only Fortune Brands Inc. and Edrington Group will remain after Remy's departure and Pernod's takeover this year of Vin & Sprit AB.

Source: Bloomberg