GLOBAL: Diageo YTD sales flat as Asia issues bite

Diageo has reported flat nine-month sales and a drop in volumes as problems in Asian markets took their toll.

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In a trading update today (17 April), the group said sales on an organic basis rose by 0.3% in the nine months to the end of March, a slowdown on its half-year performance. Reported sales in the year-to-date slid by 7.4%, which Diageo blamed on "adverse" currency movements and the termination of its distribution agreement with Jose Cuervo. 

Group volumes in the nine months fell by 2%.

In the company's third quarter to the end of March, sales on an organic basis slipped by 1.3%. 

The group's business in Asia-Pacific suffered badly in the quarter, with sales down by 19%. The statement pointed to “political instability” in Thailand and “lower trade confidence across a number of markets” for the slide. A weak performance in Chinese white spirits in the last three months of 2013, through its Shuijingfang business, also hit performance, Diageo said.

As Shuijingfang is a listed entity, it reports its performance a quarter in arrears.

The company did not make direct reference to China's anti-extravagance crackdown, as part of a wider anti-corruption initiative, which has affected the country's spirits market, particularly Cognac. 

Elsewhere in the region, Korea saw “postitive momentum” and India, Asia Travel Retail and the Middle all posted “double-digit” rises, the company said. 

Latin America & the Caribbean (LAC) also remained a bright spot for the group, with sales up 5.7% in the nine months, while Q3 saw a 28% jump in regional sales. A further upturn in Brazil and rising sales in the west of Diageo's LAC region boosted the numbers.

Diageo also saw sales rise in North America in the nine months, by 3.7%, but this was a slowdown on a 4.6% rise in the half-year. 

The group's Western Europe region saw sales broadly flat in the nine months, but the third quarter saw a 1.2% lift. 

In Africa, Eastern Europe & Turkey, Diageo's YTD sales were flat, while Q3 revenues slipped by 5.2%.

Chief executive Ivan Menezes said: “Our performance reflects the challenging environment we are operating in."  

But he added: "The current emerging market weakness does not reduce our confidence in the long term growth opportunities of these markets." 

Shares in Diageo were today trading down 3.55% at GBP18.32 in London. 

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