£1bn Johnnie Walker helps Diageo's profit

Published on Thursday 28 August 2008 21:42

JOHNNIE Walker whisky burst through the £1 billion sales mark last year, as parent company Diageo yesterday warned growth in underlying group profits could fall to 7 per cent in the current year.

It came as the world's biggest spirits company and Scotland's leading whisky producer cheered a 9 per cent rise in underlying operating profits to 2.3bn in the year to the end of June.

However, the company's forecast guidance for the current year was for growth "of between 7 and 9 per cent".

Net sales at the group, whose other brands include Guinness and Smirnoff vodka, topped 8bn – up from 7.5bn – in the latest year, while the dividend was raised 5 per cent to 34.35p.

Paul Walsh, chief executive, said he was "very gratified" at flagship Scotch whisky Johnnie Walker's 12 per cent rise in sales to more than 1bn.

He said: "It's a momentous achievement. We know it is the first premium drinks brand to reach this target. It has been helped by growth in emerging markets like South Africa and Asia. Johnnie Walker's Formula One sponsorship has also helped."

The brand grew sales in Great Britain and mainland Europe by 11 per cent.

In a generally strong performance from Diageo's whisky business, which has a 31 per cent market share, J&B also turned round its fortunes.

The brand, largely targeted at twenty-something drinkers according to the company, saw sales climb 9 per cent as it performed strongly in Europe, Africa and Latin America.

Diageo faced challenges from slowing global economies but its geographic diversity was a strength, Walsh argued.

Spending on upmarket brands was continuing despite the downturn, he added.

Walsh said: "Whether you agree with the social justice of this or not, there is certainly a nucleus of consumers in the top 50 cities (worldwide] that have the means and desire to consume the best. That is not going to change."

Pre-tax profits were flat at 2.09bn. Profits in North America rose 10 per cent.

Profits in the international division, which ranges from Latin America and Africa to the Middle East, were up 19 per cent, helped by the "Guinness Greatness" campaign in Africa.

Europe's profits were ahead 3 per cent. Guinness sales rose 2 per cent in Britain and Ireland, outperforming the general declining beer market, helped by advertising campaigns.

Profits in Asia Pacific fell 12 per cent, partly hit by the loss of the import licence in Korea for part of the fiscal year.

Diageo said Europe's weakening economies prompted it to cut its target for operating profit growth this year.

Nick Rose, chief financial officer, said costs such as grains and energy rose 90m last year and he expected a bigger hit of 150m in the coming year.