GLOBAL: Market toasts Diageo on solid FY
- Full-year net profits rise by 17% to GBP1.9bn (US$3.1bn)
- Net sales up by 5% to GBP9.94bn
- Operating profits creep up by 1% to GBP2.59bn
- Emerging markets to drive strong annual growth in sales and profits over medium-term, says drinks giant.
Diageo upbeat as emerging markets come to the fore
Diageo's share price rose by 5% on the London Stock Exchange today (25 August) after the group reported better-than-expected profits. For the 12 months to the end of June, net profits jumped by 17% to GBP1.9bn (US$3.1bn).
Profits were partially boosted by a 5% increase in net sales, to GBP9.94bn, but also benefited from a lower tax rate than many analysts had anticipated. Operating profits crept up by 1% to GBP2.59bn.
The figures provided Diageo with a platform on which to provide bullish oratory on its medium-term prospects. It forecast that net sales will rise by an annual average rate of 6%, on an organic basis, for the next few years. Net profits, meanwhile, will grow in double digits annually over the medium-term, if one-off costs and currency are excluded, the Johnnie Walker and Smirnoff distiller said.
Promising demand for premium spirits in emerging markets, consumer thirst for beer in Africa and a resurgent spirits market in North America have helped Diageo to numb ongoing pain in Europe, where its key markets of UK, Ireland, Spain and Greece, remain difficult.
The group said today that, following a strategic review of operations, it has identified cost savings in Western Europe and North America. As resources are withdrawn from these regions, cost of sales in emerging markets is expected to rise by around 20% over the next couple of years.
The firm has identified annual savings of GBP80m as a result of the strategic review, set to be achieved within two years. However, it declined to be specific on the savings identified.
Diageo CEO Paul Walsh said today: "We have strengthened the business, investing more behind our brands and in our routes to market and we have deepened our leading brand and market positions in the fastest growing markets of the world."
For the company's announcement, click here.
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