Diageo said today that growing demand for expensive spirits in the US helped lift the drinks maker’s full-year profit, but warned of weakness in emerging markets and ongoing economic troubles in Western Europe.
The world's largest producer of alcoholic drinks, Diageo, said today, 31 July, that pre-tax profit for the year to end of June 2013 increased by 8% to £3.5 billion, compared with £3.2 billion in 2012. The Guinness maker said that net sales grew 5% to £11.43 billion, which was slightly above forecasts but came in below the group's medium term target of 6%.
The company's performance was boosted by price increases in all regions along with tight cost management. Diageo also benefited from its investment in emerging economies, which now comprise some 42% of the group's business.
Diageo recorded a 'strong' performance in North America, with its net sales rising by 5% and operating profit increasing by 9% in the region.
Sales in Latin America and the Caribbean were up 15% and profits increased by 26%.
However, sales in Western Europe fell by 3% with a 7% drop in profits. Significantly, Guinness recorded a 5% drop in its Irish sales.
"The investments we have made to enhance our routes to market in Africa, Latin America and Eastern Europe have driven strong growth," noted Diageo chief executive Ivan Menezes, who took over the role as chief executive on 1 July.
"We have delivered 5% net sales growth reflecting the strength of our US spirits business and continued double digit growth in the emerging markets, despite weakness in some markets. Price increases in each region, positive mix in North America and Latin America and the rigour we have in managing our cost of production and controlling our overheads drove significant expansion in operating margin," Menezes said.
"The effectiveness of our marketing campaigns remains a competitive advantage for us and this year we have seen these campaigns extend the leadership of our brands in many markets during the year", he added.
Earlier this month on 23 July, Diageo won approval to take control of its Chinese joint-venture Sichuan Chengdu Shuijingfang Group Company.
© 2013 - ESM: European Supermarket Magazine by Ellen Lunney
