Remy Cointreau profits hit after China corruption crackdown

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An anti-corruption drive in China has hit sales of expensive cognac

Operating profits at the French spirits group Remy Cointreau have fallen 40% following a crackdown on corruption in China.

The campaign has reduced gift-giving and spending on luxury goods by civil servants, which has hit sales of Remy Cointreau's premium brands.

The world's second largest economy is also growing more slowly.

Remy, which makes Remy Martin Cognac and Cointreau liqueur, said it would cut its dividend by 9.3%.

Cognac accounts for 80% of Remy's operating profit, half of that coming from China, in particular deluxe drinks such as Louis XIII cognac, which sells for 2,500 euros a bottle.

Last month, the company announced that it had been "adversely affected throughout the financial year by the Chinese government's anti-extravagance policy, which had a negative impact on the consumption of premium spirits".

However, on Thursday it said it aimed to achieve organic growth this year.

The fall in operating profits to 150m euros ($204m; £122m) was worse than most analysts had forecast.

Remy is also looking for a new chief executive after Frederic Pflanz resigned in January fewer than 100 days into the job.

Luxury slows

Until recently, Remy Cointreau and other luxury goods makers had been riding a surge of business in China.

Exane BNP estimates that Greater China now accounts for a quarter of Louis Vuitton's revenue, 35% of Cartier's, and 45% of Omega's.

Last month, research by management consultants Bain and Company estimated that the Chinese luxury goods market would grow by 2-4% in the coming year, down from growth of about 19% in 2012.

Its Luxury Goods Worldwide Market Study said: "China, though maintaining low single digit growth in real terms, continues to boast a customer base that leads the world in terms of overall luxury consumption."

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