• Half-year net profits increase by 4.9% to GBP1.65bn (US$2.73bn)
  • Organic net sales in the six months to the end of December rise by 2% to GBP5.93bn
  • Operating profits inch up by 1.1% to GBP2.04bn
Diageo posted its half-year results earlier today

Diageo posted its half-year results earlier today

Diageo has reported slowing sales growth in the latter three months of its fiscal first half, as issues affecting the spirits category in China took a firm hold.

The company, which has majority control of baijiu producer Shuijingfang, said earlier today that group sales in the six months to the end of December rose by 1.8% year-on-year, coming in at GBP5.93bn (US$9.83bn). The half-year sales increase compares to a Q1 lift of 3.1%.

Net profits in the six months to the end of December were up by 4.9% to GBP1.65bn, while operating profits in the period crept up by 1.1% to GBP2.04bn.

While net sales in North America performed well, rising by 4.6%, and Western Europe showed brighter signs, slipping by only 1%, the company's emerging markets delivered disappointing growth of only 1.3%. Diageo highlighted a tough six months for its ShuiJingFang as well as weakness in Nigeria.

Most notably, ShuiJingFang saw sales in the half-year plunge by 66%, due to the introduction of anti-extravagance measures by the Government in late-2012. Sales of the Johnnie Walker Black Label Scotch whisky brand were also hit.

“We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker Q2,” said CEO Ivan Menezes.

“We do expect some top line improvement in the second half,” he added. “Even though some markets may remain challenging, this business is in good shape for the medium and long term.”

The company also used the results announcement to unveil a cost-cutting programme. “Over the next two months,” said Menezes, “we will set out detailed plans to simplify our processes and de-layer our organisation. This will create a more agile, accountable and effective organisation to deliver our performance ambition.

“I expect this to deliver cost savings of GBP200m a year by the end of fiscal 2017.”

Trading in Diageo's shares this morning fell following the results: At 0926 GMT, they were 5.44% down at GBP18.06.

For a breakdown of the company's performance by region, click here.

To read Diageo's official statement from today, click here.