Crackdown hits Remy Cointreau's first-half profit

A Chinese crackdown on ostentatious spending hurt demand for premium cognac made by France's Remy Cointreau, contributing to a fall of almost 15 percent in first-half operating profit.

However, the maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum said on Thursday it still expected to show growth in full-year sales and operating profit despite a mixed economic outlook.

Analysts took the view that the glass was half full rather than half empty.

"Stock performance adds confidence to the view that Remy is through the worst and on the road to recovery," brokerage Mirabaud Securities wrote in a note to clients.

Like rivals Diageo Plc and Pernod Ricard, Remy has been hit by a Chinese government crackdown on gift-giving and personal spending by civil servants, as well as slowing economic growth in China.

All three drink companies have however forecast improving sales this year.

Current operating profit for the six months to September 30 reached 102.1 million euros ($127.7 million), down 14.6 percent from the same period one year ago. That was however better than analysts' expectations of 89 million euros.

The profit decline reflected efforts to cut stock levels in China, notably in premium cognac, and a rise in spending to beef up the group's distribution network, Remy said in a statement.

Remy Cointreau's focus has been on deluxe drinks like Louis XIII cognac, which sells for 2,500 euros a bottle. This has made it more vulnerable than its rivals to China's crackdown.

Cognac represented 59 percent of Remy's sales in the first half and 76 percent of its operating income, with China accounting for roughly half of that chunk of profit.

The China slowdown contributed to a 27.7 percent fall in first-half operating profit for the Remy Martin cognac division, to 78 million euros.