Diageo Reports 5% Net Sales Growth
Excellent performances in North America and International and unchanged profits in Europe delivered double digit underlying earnings growth. Diageo's spirits brands, especially Scotch where net sales grew 11%, did particularly well.
15/02/07 Diageo has said that an 8% net sales growth in spirits is the key driver of overall performance in the second half of 2006. Marketing spend increased by a further 6% throughout the year with spend focused on growth brands and markets.
Paul Walsh, Chief Executive of Diageo, commenting on the six months ended 31 December 2006 said: "Diageo has made a strong start to the year. Excellent performances in North America and International and unchanged profits in Europe delivered double digit underlying earnings growth. Our spirits brands, especially Scotch where net sales grew 11%, did particularly well, benefiting from increased investment in marketing. As a result of this strong start we are increasing our guidance for organic operating profit growth to 8% for the full year. We still expect to return a total of £1.4 billion to shareholders through share buybacks this year and to continue our progressive dividend policy.”
"In North America our continued outperformance in the US spirits market was the key driver of the 11% organic operating profit growth we delivered. Operating leverage from price and mix improvements in beer, wine and ready to drink also contributed to the margin expansion we achieved.
"In International, we again grew marketing spend faster than net sales. This investment delivered stronger top line growth, share gains in markets from China to Mexico, organic operating margin expansion and organic operating profit grew 17%.
"In Europe, growth in our Continental Europe hub and in Russia was offset by weaker top line performance in Great Britain, Ireland and Spain and total net sales declined. However, as in North America, price and mix improvement led to organic operating margin expansion and on an organic basis operating profit was maintained.
"We believe that a capital structure broadly consistent with a single A credit rating gives Diageo the appropriate level of flexibility and given our strong free cash flow this capital structure would allow us to fund a £1 billion share buyback programme in fiscal 2008.’
