- China drops subsidy plans on imported EU brandy
- Pernod Ricard and Remy Cointreau surge
- Pernod reports inline full year
French spirits companies Pernod Ricard (RI:EPA) and Remy Cointreau (RCO:EPA) received a shot in the arm on Thursday, rising as much as 8% and 12% respectively after the Chinese authorities decided not to impose a provisional anti-dumping subsidy on imported brandy from the European Union.
China imports most of its brandy from France which explains why shares in Italian spirits maker Davide Campari (CPR:BIT) and UK spirits group Diageo (DGE) were largely unmoved with the former up 1.5% and the latter down 1.9%.
Around two thirds of Remy’s sales are generated from cognac and China is a key market for the company. Its shares are down by around a third year to date while Pernod’s shares are down around 13%.
Investment director Russ Mould at AJ Bell said: ‘Back in January, shares in Rémy Cointreau, Pernod Ricard and Diageo fell on news of a potential investigation into the market by China, representing another point of tension between the Asian country and the West. These tit-for-tat trade disputes have centred upon accusations of unfair competition and protectionism.
‘Anti-dumping is an import duty charged in addition to normal customs duty and can be levied when a foreign company sells an item significantly below their normal price. Rémy Cointreau’s shares were worst hit in January on the threat, and it is now the biggest riser on the latest development.’
CONTINUED NORMALISATION
Pernod also reported full year results to the end of June which were inline with both the company’s expectations and consensus analyst estimates.
CEO and chairman Alexandra Ricard described performance as ‘robust’ and pointed to continued normalisation of the spirits market after two years of ‘exceptional’ post-pandemic growth.
Organic net sales were broadly flat, growing 1% excluding Russia as strong performance in mature and emerging markets largely offset weakness in the US and China which saw sales declines of 9% and 10% respectively.
Operating profit grew 1.5% on an organic basis but fell 7% on a reported basis to €3.12 billion.
Looking ahead the company said it expects to see continued recovery in volumes and net sales returning to growth while sustaining organic operating margins.
Management sees a soft first quarter impacted by further inventory adjustments in the US, a continued ‘very weak’ macro context in China and a ‘good’ performance in the rest of the world.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (Steven Frazer) own shares in AJ Bell.
