31st July, 2013 by Andy Young
Diageo has announced net sales growth of 5% and an operating profit growth of 8% in its preliminary results for the year ending 30 June 2013.
The growth was helped by a strong performance in North America, where net sales were up 5% and the operating profit grew by 9%. Emerging markets are also proving to be a key area for the drinks giant, with net sales from that sector accounting for 42% of Diageo’s business, following 11% net sales growth and “acquisitions which added £233 million.”
Commenting on his first set of results as CEO Ivan Menezes said: “These results reflect Diageo’s strengths. We have delivered 5% net sales growth reflecting the strength of our US spirits business and continued double digit growth in the emerging markets, despite weakness in some markets.
“Price increases in each region, positive mix in North America and Latin America and the rigour we have in managing our cost of production and controlling our overheads drove significant expansion in operating margin.”
Menezes also acknowledged the growth of Johnnie Walker which grew by over one million cases, taking past the 20m case mark. He added: “The effectiveness of our marketing campaigns remains a competitive advantage for us and this year we have seen these campaigns extend the leadership of our brands in many markets during the year. This has been a key driver of our performance in scotch, our biggest and most profitable category, especially for Johnnie Walker which is now a 20 million case brand.”
Western Europe remains a problem area for Diageo, with net sales down by 4% over the year and the company’s CFO Deirdre Mahlan explained: “The strong positions of our strategic brands in Western Europe have of course left them exposed to market weaknesses here, primarily JεB in Spain, Guinness in GB and Ireland and Baileys in Southern Europe.”
She added: “In Western Europe, the underlying trends are unchanged. The stronger second half performance was due to the comparison against a weak third quarter in France in the prior year and in the fourth quarter, we had good momentum in Western Europe from continued growth of Captain Morgan and from innovation with the introduction of Captain Morgan Spiced and the expansion of premixes.”
In further good news for investors the results mean that Diageo will be increasing its dividend by a further 9%.
In making his first results presentation as CEO Menezes also paid tribute to the work done by his predecessor Paul Walsh, saying: “Paul Walsh provided Diageo with exceptional leadership and shaped our strength and global position, and I want to take this opportunity to thank him on behalf of the entire Diageo team. As these results again demonstrate, Paul did make a strong business even stronger.”