UK: Diageo CEO upbeat after "strong start"

By | 15 February 2007

Diageo CEO Paul Walsh has today (15 February) praised the company's "strong start to the year" after the UK drinks giant posted rising first-half sales and earnings.

The company saw operating profit lift 8% on an organic basis for the six months to 31 December, on the back of a 6% rise in revenues. Profits reached GBP1.3bn (US$2.5bn) with sales hitting GBP4.02bn.

However, Diageo's performance in its different regions diverged. In North America, sales and earnings rose with operating profit up 11%, thanks, the company said, to rising spirits sales.

In its international markets, sales jumped 16% and operating profit was up 17% thanks to growing demand for Diageo's Scotch portfolio, particularly in South Korea and Latin America.

In Europe, however, Diageo's profits were unchanged as sales dipped 2% and volumes fell 5%. The company said weaker volumes in the UK had weighed on "strong growth" on the Continent, which was led by Johnnie Walker Scotch whisky, Smirnoff vodka and Baileys cream liqueur.

Nevertheless, Walsh was upbeat about the company's performance in the first half of its financial year. He said: "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."

Walsh added that Diageo would look to return GBP1bn to shareholders while retaining an A credit rating, a move that suggests large-scale acquisitions, for instance of Absolut vodka, are not on the company's immediate horizon.

Sectors: Beer & cider, Spirits, Wine

Companies: Diageo, Johnnie Walker, Smirnoff, Absolut

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The just-drinks interview - February

Coinciding with the publication of Diageo’s first-half results, this month’s just-drinks interview is with Andrew Morgan, president of Diageo’s European operations. Morgan took the opportunity to explain to Dean Best why amid a very positive group performance, the European division has failed to shine.

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