Remy Cointreau’s rating outlook changed to negative by Moody’s

Investing.com -- Moody’s Ratings has affirmed Remy Cointreau (EPA:RCOP) S.A.’s Baa3 long-term issuer rating but changed the outlook from stable to negative.

The outlook change reflects expectations of prolonged weaknesses in the French premium spirits producer’s operational performance and key credit metrics, according to Paolo Leschiutta, Moody’s Ratings Senior Vice President and lead analyst for Remy.

"The change to a negative rating outlook on Remy reflects our expectation of prolonged weaknesses in the company’s operational performance and key credit metrics, compounded by the potential adverse effects of import duties in both the US and China," said Leschiutta.

Continued weak demand for cognac and premium spirits, especially in the US and China—Remy’s two largest markets—coupled with the threat of unfavorable import tariffs in both regions, might lead to sustained weakness in the company’s operating performance and cash generation.

After record high results in 2022 and 2023, Remy increased investments and shareholder distributions, which in fiscal 2023 exceeded cash from operations and significantly increased the company’s financial debt.

As of fiscal year-end March 2025, the company’s Moody’s adjusted leverage stood at 3.3x, exceeding the maximum level tolerated by the rating and significantly higher than the 1.5x recorded in fiscal 2023.

Despite implementing cost and cash-saving measures including workforce reductions, decreased advertising and promotions, and scaled-back investments, these efforts are not enough to counteract profit decline and potential negative impacts from import tariffs.

The rating remains supported by Remy’s strong market position in cognac, robust portfolio of premium spirits, and high inventory levels. As of March 2025, the company held inventories including aging stock with a book value of approximately €2.1 billion, exceeding its reported debt.

Remy’s liquidity is adequate, with cash and cash equivalents of €83 million as of March 2025, and full availability under its renewed €180 million committed revolving credit facility maturing in 2029.

The negative outlook stems from anticipated prolonged weakness in performance and the potential imposition of adverse import tariffs. Failure to enhance key ratios over the next 12 to 18 months could lead to a rating downgrade.

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