LONDON (Reuters) -Remy Cointreau's shares rose more than 6% on Thursday after the drinks company expressed confidence about future growth following a tough year where profits fell sharply.
The maker of Remy Martin cognac and Cointreau liquor faced difficulties throughout the year in the United States and China, which make up the vast majority of cognac sales.
A tough economy dragged in China while elevated inventories in the United States weighed as sales came down from a post-COVID boom.
The company said a recovery was anticipated only from the second half, but it signalled confidence in future growth.
Progress towards its long-term targets, including high single-digit annual sales growth, will resume from 2025-26, it said.
Chief Executive Officer Eric Vallat said the company was taking a variety of measures to restore U.S. sales and the group's growth, and looking to build up sales elsewhere in the world including Europe, Nigeria, South Africa and India.
Remy's annual organic operating profit fell by 27.8% in the year ending March 31, but this was smaller than the 28.2% decline predicted by analysts.
The sharp profit fall came alongside a drop in sales, which were down 19.2% organically.
Remy's shares pared initial gains to stand 3.9% higher by 0842 GMT, but the stock remained among the top gainers in Europe's STOXX 600 index and on track for their best day in a month.
The company's shares had hit their lowest since 2020 a day earlier, and closed down almost 30% on the start of the year.
U.S. TROUBLES
James Squire, a portfolio manager at Remy investor River Global, said the market was starting to buy into a Remy recovery after poor sentiment drove declines in the share price in recent months.
"The time to buy these stocks is when everyone else is worried," he continued, adding Remy's valuation would likely improve.
In the short-term, Remy continues to face difficulties in the United States.
The company said it had reduced staff in its U.S. division by 10% alongside other measures to improve performance.
Vallat told journalists Remy would continue to resist cutting prices or discounting. But it would pursue an "optimisation" of pricing by U.S. state for its cheaper category of cognac, hardest hit by the decline, he said.
Remy's profit beat was helped by 145 million euros ($157.82 million) in cost savings, exceeding its target of 100 million euros.
Its board would propose a 2 euro per share dividend, Remy said.