UK: Diageo's H1 weakened by Europe
- Weak Europe dents performance
- Shares fall by 4%
- Global sales, profits increase
Diageo's share price slips after group misses profits estimate
Weak consumer confidence in Europe has subdued a rise in sales and profits for Diageo in its fiscal half-year.
Diageo's share price dropped by 4% on the London stock exchange this morning, after the group failed to meet most analysts' earnings estimates and did not raise its full-year guidance, as had been hoped.
Ongoing weak demand for premium drinks in the UK, Spain, Ireland and Greece hampered the Smirnoff and Johnnie Walker distiller in the six months to the end of December, it said today (10 February). Sales in its Europe business fell by 7% on the same period of last year, to GBP1.44bn (US$2.3bn), while operating profits for the region decreased by 10% to GBP471m.
Despite this, strong demand for Scotch whisky in Asia and beer in Africa helped Diageo to report a 2% rise in global net sales for the six months, to GBP5.32bn. Excluding currency losses, sales increased by 4% on the previous year.
Net profits increased by 17% to GBP1.26bn, boosted by lower one-off charges and a higher return from the company's 34% stake in Moet Hennessy, the wine and spirits arm of LVMH. Diageo's operating profits increased by almost 12% to GBP1.72bn.
"Momentum is building in our busines," said Diageo's CEO, Paul Walsh. The drinks giant increased marketing spend by 10% during the half-year as the group backed key brands in the US and in emerging markets. Marketing spend in Europe, however, fell by 2%.
"Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010,” said Walsh.
For the full results statement, click here.
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