Diageo, the drinks giant, has reported an 8% rise in global net sales to £10.8bn despite a dip in sales in Britain and the rest of Western Europe.
Overall operating profit before exceptionals increased 11% to £3.2bn. Growth was driven by emerging markets, where net sales grew 15% and operating profits increased 23%, and Diageo recommended an 8% increase in earnings per share to 94.2p.
The firm said: “In Great Britain, reduced promotional activities across the portfolio drove 2% decline in net sales with 4 percentage points of positive price/mix.
“Smirnoff delivered 6% net sales growth, driven by Smirnoff Red gaining share despite the promotional reductions. Beer net sales grew 6% with price increases on Guinness and a successful year for Red Stripe as the brand’s sales, distribution and marketing were brought in house.”
Across Western Europe, net sales fell 4%. Sales across the continent increased 9% to £2.7bn, with Russia and Eastern Europe up 13% and Turkey up 983% following the acquisiton of Turkish spirits firm Mey Içki.
Andrew Morgan, pesident of Diageo Europe, said: “The economy remains very uneven in Europe. We continue to deliver substantial sales and profit growth in Europe’s emerging countries of Russia, Eastern Europe and Turkey, as well as a good performance across Northern Europe. Clearly though, Southern Europe remains challenging.
“From a category point of view, scotch remained very strong in the emerging markets offsetting decline in Southern Europe. Smirnoff continued to grow in Great Britain and Captain Morgan continued to perform strongly with 18% net sales growth. Weaker Baileys performance was driven by the change in promotional strategy in Great Britain and the challenges in Southern Europe. Overall marketing campaign activity has been maintained and the reinvestment rate increased as we spent more behind scotch and emerging markets while improving effectiveness in Western Europe.
“In Turkey, the integration of Mey Içki has been completed successfully and the enhanced route to market will be a key growth driver as we bring our international brands to the expanding middle class consumer base there. Finally, the new operating model has delivered further efficiencies and improved operating margin.”
Paul Walsh, Diageo chief executive, said: “Diageo is a strong business, getting stronger and the results we released this morning 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; 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.”
