UK: Diageo "on track" for medium term as FY numbers hold firm

• FY net profits up by 2.7% to GBP2.07bn (US$3.29bn)
• Net sales in year to end of June up by 8.3% to GBP10.8bn
• Operating profits jump by 21.7% to GBP3.16bn
• Diageo "on track" for medium term targets

Diageo has posted increases in sales and profits for its latest fiscal year, with the troubles in Southern Europe failing to hold back the emerging markets.

Group net profits for the 12 months to the end of June rose by 2.7% to GBP2.07bn (US$3.29bn), the company announced today (23 August). Net sales in the same period were up by 8.3% to GBP10.8bn. 

Operating profits rose by 21.7% to GBP3.16bn.

The UK-headquartered group pointed to its performance in emerging markets, where net sales grew by 15% and operating profits leapt by 23%. Emerging markets now account for around 40% of Diageo's business.

Paul Walsh, the group's chief executive, said: "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." 

The Smirnoff producer has also upped its marketing investment by 8% over the year, it revealed. 

Its Latin America and Caribbean business produced the most eye-catching performance, where operating profits rose by 22% as sales were up by 19%. Volumes grew 10% in the region over the 12 months. The company boosted its marketing spend by 17% to "capture the consumer opportunity in the emerging middle class" it said. 

Africa saw a similarly robust performance, with operating profits up 20%, while in Asia Pacific profits rose by 18%. 

In the developed markets, the group's performance was weaker. In North America, profits edged up by 6%, as volumes remained relatively flat. However vodka brand Ciroc saw sales growth of 62% in the region, helped by investment in "targeted campaigns". 

Europe saw profits up by 3%, as sales and volumes both remained flat. Andrew Morgan, Diageo Europe's president, said: “The economy remains very uneven in Europe." He pointed to growth in emerging areas, such as Russia, Eastern Europe and Turkey, as well as a "good performance across Northern Europe". But, he added: "Southern Europe remains challenging."

Globally, Buchanan's saw the biggest growth of its whisk(e)y brands, with sales up 23%. Ciroc was top perfomer out of vodka, with sales growth of 63%.

Jose Cuervo, which the group distributes but is the subject of speculation linking Diageo to a purchase of the brand, saw net sales drop 5%.

Guinness sales remained relatively flat. 

In 2011, the company set out a target of 6% annual sales growth. Looking ahead, Walsh said the group was "firmly on track to meet those goals."

The firm will pay a final dividend of GBP0.269 pence per share, which means that the full dividend will be GBP0.435 pence. The final dividend will be paid on 22 October.

Shares in Diageo were up this morning by 0.73% at 1692.76p.

To read the company's official statement, click here.