Remy Cointreau beats sales forecasts, but cognac recovery doubts weigh on shares

By Hugo Lhomedet and Emma Rumney

July 29 (Reuters) - French spirits group Remy Cointreau reported stronger-than-expected first-quarter sales on Wednesday as growth in its cognac business and solid demand in Asia-Pacific markets outside China helped offset weakness elsewhere.

The maker of Remy Martin reported a 1.3% rise in organic sales to 223.2 million euros ($254.45 million), beating analysts' expectations for a 0.2% increase to 218.8 million euros, according to a company-compiled consensus.

Remy is seeking to rebuild growth after a prolonged downturn caused by U.S. distributor destocking and weak demand in China.

Its cognac division returned to growth, with organic sales rising 7.7%, well above analysts' expectations for a 1.3% increase, supported by strong momentum in Asia-Pacific markets outside China.

The company's shares fell 5.2%, however, as analysts cautioned that the stronger-than-expected performance did not yet signal a sustained recovery in the group's two key cognac markets.

"There are some positive signs, but no recovery yet for cognac in either the U.S. or China," Bernstein analysts said in a note.

"Cognac pricing remains pressured, China is not yet clean, and U.S. distribution adds near-term noise," Barclays analysts said.

Sales in the liqueurs and spirits division fell 6.6% organically, compared with expectations for a 1.5% decline, as unfavourable shipment timing in the United States weighed on performance.

Jefferies said the stronger-than-expected cognac performance and unchanged targets should reassure investors, though weakness in liqueurs and spirits and the acceleration needed in the second half could limit upside.

The company maintained its full-year targets.

($1 = 0.8772 euros)

(Reporting by Hugo Lhomedet in Gdansk and Emma Rumney in London; Editing by Matt Scuffham)