🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

Shares of European spirits makers jump as China drops provisional brandy measures

Published 08/29/2024, 05:03 AM
Updated 08/29/2024, 07:56 AM
© Reuters. FILE PHOTO: Bottles of Remy Martin VSOP cognac, Remy Martin XO cognac and St-Remy XO Brandy are displayed at the Remy Cointreau SA headquarters in Paris, France, January 21, 2019. REUTERS/Benoit Tessier/File Photo
PERP
-
DGE
-
RCOP
-
CPRI
-

By Alessandro Parodi and Ozan Ergenay

(Reuters) -Shares in French spirits makers Remy Cointreau and Pernod Ricard (EPA:PERP) rallied on Thursday after China's commerce ministry said it will not immediately impose provisional anti-dumping measures on brandy imported from the European Union.

The EU in July imposed tariffs on imports of electric vehicles from China, which could use the threat of measures on liquor imports as leverage, two analysts told Reuters.

"There's clearly a complex .. set of interactions at the moment between the EU and China," Bernstein analyst Trevor Stirling said, adding that Cognac and dairy products are potential collateral damage in the process.

Shares in Remy, which jumped more than 12%, were 5.3% higher by 1145 GMT, while Pernod, which climbed as much as 10%, was up 3.3%.

"I think that the market reaction today was to the initial headlines that said no tariffs for now," Barclays analyst Laurence Whyatt said, adding that investors then likely recognised that tariffs could be imposed at a later date.

China's commerce ministry said in a statement that investigating authorities had determined that dumping had taken place and that its domestic brandy industry had been threatened.

It added that the investigation had found European distillers selling brandy at a margin of 30.6%-39.0% and left open the possibility to act at some time in the future.

Citi said that if dumping margins were translated into additional tariffs, its analysts would expect Chinese retail price increases of about 16% and 20% for Pernod and Remy, respectively, with an estimated impact on group earnings per share (EPS) of about 2% and 8%.

"Our discussions with investors suggest most were expecting – and share prices were already discounting – around a 50% incremental cognac tariff rate," the bank said.

Pernod Ricard's CEO Alexandre Ricard refused to immediately comment on the decision as he hosted the company's yearly results on Thursday.

The French cognac industry makes up almost all of China's EU brandy imports. Beijing announced the probe in January, weighing on sentiment towards producers like Remy, which makes some 70% of its sales from cognac, with China its most profitable market for the brandy.

Shares in Italian spirits maker Campari (LON:0ROY) and Johnnie Walker whisky maker Diageo (LON:DGE) also jumped briefly after the announcement, but were last up 1.4% and down 1.9%, respectively.

German carmakers Volkswagen (ETR:VOWG_p) and BMW (ETR:BMWG), which have also been under pressure on uncertainty over how China might respond to the EU's new tariffs on imported Chinese EVs, rose slightly on the news.

© Reuters. FILE PHOTO: Bottles of Remy Martin VSOP cognac, Remy Martin XO cognac and St-Remy XO Brandy are displayed at the Remy Cointreau SA headquarters in Paris, France, January 21, 2019. REUTERS/Benoit Tessier/File Photo

Shares in BMW, Porsche and Mercedes-Benz (OTC:MBGAF) were up 0.1%, 1.1% and 0.6%, respectively.

"This looks like a negotiation tactic from China," Barclays' Whyatt said. "Can they persuade the EU to roll back some of the measures that have been imposed?"

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.