UK: Organic sales slip in Q3 for Diageo, upbeat on FY

Diageo has reported a slide in organic like-for-like sales in its latest quarter, but has reiterated its forecast of operating profits growth for the full-year.

In an interim statement, released today (7 May), the drinks giant said that net sales in the quarter to the end of March were down by 7% year-on-year, with planned stock reductions in the US resulting in a drop in volumes in the quarter of 1m cases.

On a reported basis, however, sales rose by 11% in the quarter, thanks primarily to the impact of exchange rate movements since the comparable period.

For the first nine months of Diageo's fiscal year, sales were flat on an organic basis, but leapt by 16% on a reported basis.

"As we anticipated, trading in markets around the world has weakened in the second half of the fiscal year," said company CEO, Paul Walsh. "There has been a significant decline in the Russian market from the beginning of January and the Global Travel Retail business continues to be adversely affected by the economic conditions.

"However, through our actions, including the reduction in trade stock levels ..., our focus on marketing efficiency and the implementation of our restructuring programme, we are taking the steps necessary to put ourselves in a position to emerge from this global downturn as an even stronger business."

Walsh added that the company still expects organic operating profits growth for the year to the end of June to come in between 4% to 6%. Continued positive exchange rate impacts and the lower tax rate mean that growth in reported EPS will be double-digit, he said.

Diageo is widely-thought to be looking at acquiring full control of Moët Hennessy, the drinks arm of French luxury goods firm LVMH Moët Hennessy Louis Vuitton. Despite a statement from LVMH last month, denying that negotiations had begun, sources close to the situation have told just-drinks that Diageo is both willing and able to buy Moët Hennessy, in which Diageo already holds a 34% stake.