Morning Note: Market news and an update from Remy Cointreau.

Market News

US equities moved higher last night – S&P 500 (+0.2%); Nasdaq (+0.7%) – with Tesla (+22%) a strong performer following its results the previous evening. Gold miner Newmont Mining fell by 15% after missing third-quarter profit expectations on higher costs, mainly from increased contractual labour expenses and elevated operational costs in three projects. The company also cut its production forecast.

The 10-year Treasury yield pulled back to 4.18%, while gold held steady at $2,727 an ounce. Brent Crude rose to $74.78 a barrel. China’s latest stimulus measures may lift oil demand by 100,000 barrels per day, boosting prices by up to $2 a barrel by late 2025, Goldman said.

In Asia this morning, equity markets in China (Shanghai Composite, +0.6%) and Hong Kong (Hang Seng, +0.6%) rose despite comments from the IMF’s Asia-Pacific department chief that the recent stimulus measures fall short of what’s needed to address deflationary risks and the central government “has to spend” more. Elsewhere, the Nikkei 225 fell by 0.6% ahead of the weekend’s parliamentary election.

The FTSE 100 is currently little changed at 8,267. The FT reports that UK consumer confidence has hit the lowest level this year ahead of the potential tax rises expected in next week’s budget. The GfK index fell to -21 in October, a one point fall from the previous month, and highlights a lack of confidence to spend income on goods and services. Business confidence also slipped, with the flash PHI composite output index coming in at 51.7.

Chancellor Rachel Reeves said she’ll change fiscal rules in a move that may allow Britain to borrow as much as £70bn more over the next five years. Sterling trades at $1.2960 and €1.1980.

Profits in the latest quarter halved at Mercedes-Benz as a result of slowing sales of electric vehicles and in China.

Source: Bloomberg

Company News

Rémy Cointreau has this morning released a weak revenue update which highlights tough market conditions in China and a slower than expected recovery in the US. The company has lowered its full-year revenue guidance, although the implementation of a new €50m cost cutting plan will help protect the bottom line to some extent. In response the shares are little changed, having already fallen over recent months in response to similar announcements from industry peers.

Rémy Cointreau is a global alcoholic beverages business, with iconic brands including Rémy Martin, Cointreau, Greek spirit Metaxa, Mount Gay rum, and The Botanist gin. The group’s strategy is to move upmarket through portfolio streamlining at the expense of low-end products, adaptation of its distribution network, and expiration of distribution agreements with partner brands. The target is to become the world leader in ‘exceptional spirits’ – described as retailing at more than $50. The business plays well to the increased global demand for premium and luxury products, the rise of mixology and at-home consumption, and strong growth in online sales. The group is targeting a gross margin of 72% and a current operating margin of 33% by 2030.

However, in the near term the industry is struggling. In the three months to 30 September 2024 – the second quarter of the group’s financial year to 31 March 2025 – reported sales fell by 16.5% to €316.7m, including a negative currency impact of 0.4%. In organic terms, sales fell by 16.1%.

The result was a slightly deterioration on the previous quarter (-15.6% organic), leaving sales down 15.9% for the group’s first half. Sales in the six months to 30 September are still 1.5% above the same period in 2019 (i.e., pre-pandemic).

By region, sales fell by 22.8% in organic terms in the Americas as destocking continued. Although there was a sequential improvement in depletions in the US in Q2 vs Q1, the trend was below management expectations. Sales in the APAC region fell by 8.8% as a result of tough year-on-year comparatives and weak market conditions in China, as well has slack conditions in Southeast Asia. The EMEA region fell 18.8% driven by persistently sluggish consumer trends.

By product type, sales of Cognac were down 20.7% in the latest quarter on an organic basis to €206m. In the US, ongoing destocking continued to weigh on sales in a market impacted by the normalisation of consumption and high interest rates. Southeast Asia and Europe were hit by fierce promotional conditions. The Liqueurs & Spirits division saw a marked improvement versus the previous quarter, albeit sales still fell by 4.9% in organic terms to €106m. EMEA enjoyed a slight increase, as did Japan.

Looking forward, the company has lowered its full-year guidance – it now expects sales to experience a double-digit decline in organic terms versus the previous expectation for a ‘gradual recovery over the course of the year’. By region, the Americas isn’t expected to return to growth before the March quarter at the earliest. Sales in the APAC region in the second half will see a sequential deterioration versus the first half. EMEA will see continued subdued consumer trends in the second half.

An organic deterioration in the current operating margin is expected to be partially offset by a new cost cutting plan totalling over €50m. The previous guidance was to ‘protect profitability’. The group has reiterated its long-term targets.

Source: Bloomberg