Slowdown in China hits French drinks giant

Shares in Remy Cointreau nosedived Tuesday after the French drinks giant issued a profit warning in reaction to a sharp slowdown in cognac sales to China. Unveiling a 20 percent fall in first-half net profit, Remy said it expected sales and margins to fall further in the second half of its reporting year and warned of a double-digit decline in operating profit. In a flat overall market, the group's shares lost more than eight percent of their value in the hours after the company posted net profit of 69.3 million euros for the six months to September.Sales were down by 6.3 percent at 558 million euros. Remy said the uncertain environment in Europe, the context of slower growth in China, and a lack of short-term visibility, meant things would get worse before they got better. The group blames the slowdown in China on a large build-up of stocks by retailers there, rather than a sign of well-heeled consumers turning away from cognac, which is considered a prestigious beverage and is frequently used to toast business deals in the People's Republic. That market reportedly has come under pressure in recent months following the launch of a crackdown on ostentatious consumption as part of anti-corruption efforts. Analysts at brokerage Gilbert Dupont said: "The group is very cautious about the outlook for 2013/14. "The climate in China is worse than expected and the outlook there remains unclear." Aurel BGC added: "The group managed to maintain its margins in the first half despite the drop in sales, but with cognac sales to China still under pressure the second half is going to be delicate, even if the group is still confident about its future there."