Post date: Saturday, 25th August 2012

Exports to emerging markets drive Diageo growth

 

The high-growth markets of the world, especially in Latin America, and an increasing taste for scotch whisky have seen a jump in profit of 32% for drinks giant Diageo.

The UK-based company – makers of Guinness, Smirnoff, Baileys and Johnnie Walker - reported pre-tax profit for the year to the end of June of £3.1bn compared to the £2.4bn the company made in the previous year. Sales rose 10% to £14.6bn and the company is offering an 8% dividend rise.

Paul Walsh, chief executive of Diageo, which is the world’s largest producer of spirits, said: “Diageo is a strong business, getting stronger and the results show that very clearly.

"We have increased our presence in the faster growing markets of the world, through both acquisitions and strong organic growth. We have enhanced our leading brand positions globally, through effective marketing and industry leading innovation and we have strengthened our routes to market."

He added: "6% organic top line growth, 9% operating profit growth and 60 basis points of margin expansion is a strong performance and demonstrates our commitment to delivering efficient growth.

"A year ago I set out our expectations for the medium term and these results put us firmly on track to meet those goals.

"In F12, we have continued to invest to ensure this business is well positioned for the future. Our confidence in the achievement of our medium term guidance is underscored by the 8% recommended increase in our final dividend."

He told the Today programme on BBC radio that the growth of the middle classes in the emerging markets, and their love of scotch – seen as a quality luxury British brand – had fuelled the success.

In contrast, he admitted that Europe remained challenging, with a profits fall of 1%.

Emerging markets, which amount to almost 40% of Diageo's business, grew net sales 15% and operating profit 23%, while acquisitions in faster growing markets, primarily Mey İçki in Turkey, added £320m of net sales and £82m of operating profit after transaction and integration costs.

The year saw Diageo increase its ownership stake in Shuijingfang and Halico and announce an agreement to acquire the Ypióca brand in Brazil and the intention to invest a further £1bn in scotch capacity. 

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