Diageo Reports Rise In Net Sales But Duty Free Sales Fall

[John]

Diageo has reported a 15% rise in net sales in the year to June 30 2009 but the global travel business was hit by declining passenger numbers and customer de-stocking.

In a year of global economic downturn Diageo delivered organic net sales in line with the previous year, 4% organic growth in operating profit and a 10% increase in reported earnings per share (eps). But world travel continued to be affected by the global economic crisis.

Lower volumes in the super deluxe segment led to mixed fortunes for the supplier. In the Middle East, while total volume sales grew by 3% and net sales rose by 6%, primarily because of an increase in sales of standard Scotch whisky, a decline in global travel and net sales was recorded as the travel-retail business continued to be affected by lower passenger numbers. But this was partially offset by volume and net sales growth in the Middle East driven by a strong performance in the Scotch whisky sector.

In Latin America Diageo continued its significant leadership in market share and maintained efficiencies through multi-market campaigns. In Africa the transfer of spend on ready-to-drink, cider and beer brands in South Africa to the new joint venture there offset increased spend elsewhere in Africa on beer and ready-to-drink brands.

Sales of Johnnie Walker Scotch whisky by volume fell by 12% and net sales were down by 3%. Johnnie Walker Red Label increased net sales following strong growth in Mexico while net sales of Johnnie Walker Black Label were flat. Net sales of super deluxe variants declined as growth in Latin America, Africa and the Middle East was offset by declines in global travel.

Diageo CEO Paul Walsh said: "This has been a very challenging year. Overall, however, our results demonstrate the resilience of our business. Our brand range and our geographic reach enabled us to deliver 4% organic operating profit growth and 10% eps growth. While the economic downturn has affected all markets, the response of customers and consumers has not been uniform and so the impact on our business has been varied. By region, international, North America and Asia/Pacific have been stronger than Europe. By category, we have delivered growth in sectors that account for more than 50% of our sales, primarily vodka, rum, tequila and beer. The gin and wine categories have been weaker and Scotch whisky and liqueurs have been most affected by de-stocking."?

John

Source: DFNI Online