Rémy Cointreau said cognac sales rose 12.4% on an organic basis in its fiscal second quarter, as shipments to China picked up ahead of the Mid-Autumn Festival and lifted the French spirits group's first-half sales to 510.9 million euros.

For investors in Asia, the result is the clearest sign yet that the region is again carrying the maker of Rémy Martin. Sales in Asia-Pacific rose 14.3% in the six months to September, while the Americas fell 5.5% and Europe, the Middle East and Africa slipped 2.2%, the company said in its Oct. 28 release.

Group sales rose 4.2% organically in the July-to-September quarter, ahead of the 3.6% average forecast in a company-compiled consensus, according to Reuters. For the half, organic growth was 2.9%. On a reported basis sales rose 4.4%, helped by a stronger renminbi, which more than offset a softer U.S. dollar.

China Drives Rémy Martin's Rebound

The cognac division booked 338.7 million euros in the first half, up 10.3% organically from 300.2 million euros a year earlier. Rémy said China led the second-quarter gain, with shipments accelerating before the holiday, and the rest of Asia also had a solid quarter, led by Rémy Martin XO and VSOP.

The comparison is flattering. A year ago, Rémy reported an 11% drop in second-quarter sales and cut its full-year targets, blaming a weaker Chinese market and a late Mid-Autumn Festival, Reuters reported at the time. Cognac sales fell 13.5% in that quarter.

The swing since then has been sharp. In the April-to-June quarter, sales in China were in "limited decline," according to The Drinks Business, and Asia's growth came from other markets. Three months later, China was the engine.

Shipments are not the same as drinking. The company described the China gain as shipments ahead of a holiday, not sales to consumers, and it did not give a separate figure for China.

Outside cognac the picture was weaker. Group-wide, liqueurs and spirits, which include Cointreau, The Botanist and Mount Gay, fell 7.4% organically in the quarter. In Asia-Pacific the division's sales only edged up, helped by Japan, Taiwan, New Zealand and travel retail.

China's spirits market remains difficult for local producers too. Kweichow Moutai's third-quarter profit rose 3.8% as price increases and direct sales through its app offset weak distributor channels.

Tariff Bill Shrinks, but China Cost Stays

Rémy now expects tariffs to cut current operating profit by about 5 million euros in fiscal 2026-27, down from about 20 million euros previously. The entire remaining cost sits in China.

The U.S. impact is now expected to be zero. The company said that reflects lower U.S. duties on imports from the European Union, which fell to 10% from 15%, and 6.4 million euros of tariff refunds for the previous fiscal year booked in the first half. Products from the United Kingdom and Barbados are now exempt from U.S. tariffs, it said.

The China estimate assumes a minimum import price set under an agreement signed with the Ministry of Commerce (MOFCOM), the company said. Rémy plans to reinvest all of the roughly 15 million euros in tariff savings in the business.

Currency has also turned in its favor. The group now expects a positive effect of about 15 million euros on sales, compared with a previous forecast of a 15 million euro hit, and a gain of 3 million to 5 million euros on current operating profit.

Guidance Held as Shares Price In Recovery

Rémy confirmed its targets for the year to March 2027: a return to sustainable organic sales growth, gathering pace through the year, and a slight organic improvement in current operating margin. It aims to keep net debt below 3.5 times EBITDA at the end of March.

The September issue of a 250 million euro hybrid bond, with a 6.75% fixed coupon, will help reduce that ratio further because the bonds count as equity, the company said.

Not everyone is convinced that the good news is still ahead. Analysts at TP ICAP Midcap said the recovery is already reflected in the share price after a recent rally, leaving the risk-reward balance less attractive, according to Reuters.

Problems in the United States have not gone away. Cognac sales in the Americas fell against a high comparison base and as distributors cut stock after changes in U.S. distribution, though Rémy said depletions, or wholesaler shipments to retailers, kept improving from the first quarter.

The next test comes on Nov. 25, when Rémy reports half-year earnings and hosts a webcast to set out medium-term financial objectives and its RC Forward transformation plan. Investors will be looking for how much of China's second-quarter surge holds once the festival orders have been sold through.