Diageo posts volume and value rises

26 January, 2017

Diageo has announced growth across all its regions, with 1.8% overall organic volume growth and 4.4% organic net sales growth in the half year period to December 31.

Reported net sales (£6,421 million) and operating profit (£2,065 million) were up 14.5% and 28.0% respectively, reflecting “accelerated organic growth and favourable exchange”.

The results were attributed to consumers worldwide “trading up and drinking better”, a trend that pulls on the strength of Diageo’s “premium portfolio”.

Reported volume growth was either flat or growing in low digits in all of Diageo’s markets, however reported net sales were in double digits, with North America growing 16%, Europe, Russia and Turkey +13%, Africa +13%, Latin America and Carribean +20% and Asia Pacific +12%.

Ivan Menezes, chief executive of Diageo said: “We have delivered a strong set of results with broad based improvement in both organic volume and top line growth and this positive momentum demonstrates continued effective execution of our strategy. Highlights this half include improved performance in our US Spirits business and across our scotch portfolio, driven by our focus on marketing with impact, innovating at scale, expanding our route to consumer, and winning in reserve.

“Progress on productivity supports growth, margin improvement and consistent strong cash flow generation as well as improving our agility. Diageo is building a stronger, more consistent, better performing company. We are identifying consumer trends faster, expanding the reach of our products across markets and developing trade channels to capture these growth opportunities.

“Our productivity work is on track, driving efficiency and effectiveness across the business. Our work on trade and marketing spend gives us better data enabling smarter, quicker decisions that generate higher returns. Our expectations of delivering stronger financial performance this year are unchanged. We are confident of achieving our medium term objective of consistent mid-single digit top line growth and 100bps of organic operating margin improvement in the three years ending 30 June 2019.”

Thomas Buckley and Paul Jarvis of Bloomberg News said: “Diageo Plc’s first-half sales and earnings beat analyst estimates as the world’s biggest distiller starts to move away from a recent history of disappointing investors.

“Diageo has exceeded estimates the last two half-years, providing relief for chief executive officer Ivan Menezes after four straight misses tested investor patience. The first-half performance benefited from higher prices in countries including Russia and Turkey, and saw strong sales in regions including Latin America, the U.S. and China.” 

James Edwardes Jones, an analyst at RBC Capital Markets, said in a note: “It’s not often that we’re able to write that Diageo’s reported a strong set of results across the board, but that seems to be the case.”

Bloomberg reports that Edwardes Jones said the standout region was Latin America, which had organic revenue growth of 11%, compared with estimates for a 2% gain. Within that region, sales in Mexico rose 21%, boosted by its Black & White scotch.

Keywords: diageo resluts




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