REMY Cointreau, the French drinks giant behind Islay's Bruichladdich Distillery, has seen operating profits slide by more than 40 per cent amid weak demand for premium spirits in China.
Sales of imported spirits, chiefly whisky and Cognac, have been hit in China because of a government-led austerity measures and curbs on corporate gift giving.
Paris-listed Remy, which generates nearly 50 per cent of its cognac sales in Asia-Pacific, has responded to weaker demand by reducing supplies into Chinese distribution networks.
And it said the move had been a major influence as operating profits fell by 38.8 per cent to €150.2m for the year ended March 31.
The China factor was also cited as sales fell across the group by 10.7 per cent to €1.03 billion.
Sales of Remy Cointreau slid by 20.8 per cent to €551.2.
Remy's Cognac division saw operating profits decline by 43.9 per cent to €125.4m, with the company noting an unfavourable geographic mix and sustained marketing investment had also weighed on results.
However, the company emphasised the situation in China "should not mask the brand's momentum in the US, Japan, Russia and Africa".
The challenges faced by the company extended to its liqueurs and spirits division, which is less exposed to the Chinese market.
The division, which includes Bruichladdich, Metaxa and Mount Gay, saw operating profit fall by 21.2 per cent to €37.1m.
This came amid competitive conditions in Europe and an increase in advertising and promotional activity in the second half of the year.
Sales of liqueurs and spirits edged up by 3.3 per cent to €237.3m, with double digit percentage growth on Metaxa and Mount Gay offsetting a fourth quarter decline in Cointreau sales.
Remy reported that Bruichladdich, which it acquired for £58m in 2012, was expanding its presence within its network.
In a presentation to investors, the company said production had been doubled at the Bruichladdich Distillery on Islay over the period, adding that is was now pursuing a strategy based for its Scotch whisky arm based on the Bruichladdich, Port Charlotte and Octomore brands.
Scotch whisky played a notable role for Remy Cointreau in its partner brands division, which booked operating profits of €8.7m for the year.
Some €3 million of the figure was credited to the Edrington Group brands sold by the company in the US.
Sales in partner brands grew by 6.1 per cent to €243.1m, with €103m generated by the Edrington brands.
Revenues were also driven by the Champagne brands sold by Remy in the US, in addition to spirits distributed in Belgium and the Czech Republic.
But the company noted that its contract with Edrington in the US had come to an end on March 15 after "more than 15 years of fruitful collaboration".
Edrington, whose brands include The Famous Grouse, Highland Park and The Macallan, has set up new subsidiaries in the US, south-east Asia and the Middle East.
In spite of the uncertainty in China and weak economic conditions in western Europe, Remy said it anticipates a return sales and operating profits in its current financial year.