UK: US growth drives Diageo full-year profits

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Diageo has pointed to strong sales growth in the US and more cost-effective operations in Europe for a robust set of full-year results.

The UK drinks giant said today (31 August) that operating profit was up 6% to GBP2bn (US$3.8bn) for the year to 30 June, on the back of a 9% rise in net sales to GBP7.3bn.

North America continued to prove a rewarding market for Diageo with key brands Smirnoff vodka, Captain Morgan rum and Jose Cuervo Tequila enjoying double-digit sales growth. Profits from the business rose 6% to GBP829m as net sales increased 7% to GBP2.5bn.

The company also saw US marketing campaigns behind its beer brands pay off as Guinness, Red Stripe and Smithwicks tapped into growing demand for imported beers across the Atlantic.

In Europe, however, Diageo's performance proved less buoyant. Operating profits from the business rose 6% to GBP737m but this growth largely came on the back of a series of streamlining measures aimed at reducing costs.

Sales in Europe, Diageo said, were flat on the year, reaching GBP2.5bn, as declining RTD sales and a tough Irish beer market weighed on the figures.

Diageo's international business enjoyed strong top-line growth as the company began to see the fruits of its turnaround strategies in markets including Nigeria, South Korea and Taiwan.

Operating profit rose 9% to GBP644m while net sales were up 13% to GBP2.2bn. Diageo said revenue growth from the business had enabled it to beef up marketing investment behind marketing key brands, particularly Johnnie Walker Scotch whisky, in emerging markets like China and Mexico.

Diageo CEO Paul Walsh said: "Diageo's strong full-year performance is the result of brand-building marketing campaigns, better sales execution to build superior relationships with our customers and successful new product launches."

He added: "North America continues to deliver industry beating top-line growth; a more cost-effective European business is driving operating profit and margin growth; and the rate of sales growth in (our) international (markets) has accelerated following new brand introductions and increased investment."

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