Diageo, the drinks manufacturer, has reported “strong sales momentum” in a public statement in preparation for its results announcement for the year ending 30 June 2006.
The company said that it expects organic net sales growth of 6% and organic operating profit growth to remain at 7% when results are formally announced, on 31 August 2006.
It also said that it expects to return £1.4bn to shareholders, with dividend payments to hit £864m, while free cash flow will be in line with that achieved in the prior year.
Diageo placed its average net and closing debt to 30 June 2006 at £4bn.
Strong performance was bolstered by worldwide growth of key brands like Johnny Walker and Smirnoff, Diageo said. It added that its brands in North America continue to perform strongly thanks to the popularity of premium brands there, but conceded that Europe has been “subdued”, which has led to cost cutting measures during the period.
Markets in Latin America, Africa and Asia have performed with “double-digit top line growth”, with Latin America returning particularly positive results.
Paul Walsh, chief executive of Diageo, said: “The strength of our brands and our broad based geographic exposure continue to provide us with opportunities. We expect that relentless focus on proven brand and market-building strategies will ensure that this level of top and bottom line organic growth together with continued strong cash generation remain the consistent themes of Diageo’s performance.
“Looking ahead to the year ending 30 June 2007, we expect that organic net sales growth will be in line with that achieved in the current year. We will continue to grow investment in marketing at a rate above that of net sales growth. Even with this rate of investment, and with continued pressure on input costs we expect to deliver organic operating profit growth at least equal to that achieved in the year ending 30 June 2006.”
