Global sales figures remain stubbornly flat across the drinks sector with premium spirits brands suffering the most – a trend reflected in Diageo’s year-end results causing the giant to revise its forecasts for the current financial year. Although operating profits had crept up 4% to £2.6bn, Diageo admits that underlying sales were on the whole flat and pre-tax profits were slightly down, thanks in part to restructuring costs
|
|
|
Organic movement |
Reported movement |
Volume in millions of equivalent units |
141.3 |
145.0 |
(4%) |
(3%) |
£ million |
|
|
|
|
Net sales |
9,311 |
8,090 |
- |
15% |
Operating profit before exceptional items |
2,613 |
2,304 |
4% |
13% |
Profit attributable to parent company’s equity shareholders |
1,621 |
1,521 |
|
7% |
Basic eps |
65.2p |
59.3p |
|
10% |
In a year of global economic downturn Diageo nevertheless delivered organic net sales in line with the prior year; 4% organic growth in operating profit and 10% growth in reported eps
Paul Walsh, chief executive officer of Diageo, said: “This has been a very challenging year. Overall however our results demonstrate the resilience of our business. Our brand range and our geographic reach enabled us to deliver 4% organic operating profit growth and 10% eps growth. While the economic downturn has affected all markets, the response of customers and consumers has not been uniform and therefore the impact on our business has been varied. By region, International, North America and Asia Pacific have been stronger than Europe. By category, we have delivered growth in categories which account for over 50% of our sales, primarily vodka, rum, tequila and beer. The gin and wine categories have been weaker and scotch and liqueurs have been most impacted by de-stocking.
“Smirnoff, Captain Morgan, Jose Cuervo and Guinness, two of our three largest local priority brands, Buchanan’s and Windsor, and category brands, Cîroc, Cacique and Harp, all grew supported by innovation and effective marketing. We benefited from the addition of Ketel One vodka, Zacapa rum and Rosenblum Cellars wine, all of which have broadened our brand range in important categories. Johnnie Walker faced a tougher market environment being at a relatively higher price point and saw more impact from de-stocking. The consumer downturn in Spain and de-stocking in a number of markets also affected the performance of Baileys.
“We took action quickly to manage these difficult times, reducing our cost base and refocusing marketing spend as consumer trends changed. In fiscal 2010 we will benefit from cost reductions of £120 million as a result of our global restructuring initiative.
“While the global economy appears to be stabilising, there is still uncertainty as to the sustainability and pace of any recovery and F10 will be challenging, as we lap a strong first quarter and a reasonable first half performance this year. That being recognised, we expect to deliver low single digit organic operating profit growth in fiscal 2010.”
Key brand performance
Brands (excluding RTDs) |
Volume |
Organic |
Reported |
Smirnoff |
(2) |
2 |
17 |
Johnnie Walker |
(11) |
(6) |
4 |
Captain Morgan |
3 |
7 |
29 |
Baileys |
(10) |
(9) |
3 |
JεB |
(13) |
(12) |
- |
Jose Cuervo |
2 |
3 |
27 |
Tanqueray |
(10) |
(8) |
12 |
Crown Royal - North America |
(1) |
(1) |
23 |
Buchanan’s - International |
(15) |
2 |
18 |
Windsor - Asia Pacific |
3 |
22 |
17 |
Guinness |
(3) |
4 |
16 |
(5) |
(1) |
(13) |
1 August 2009 - Felicity Murray
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