Diageo sparkles and plays down emerging markets’ slowdown

By TERRY MURDEN
Published on 23/08/2012 21:30

PAUL Walsh, boss of whisky-to-Guinness group Diageo, said on Thursday that the impact of any slowing growth in emerging markets would be minimal on the world’s biggest drinks company.

Walsh also brushed aside any threat to the company’s investment plans should Scotland opt for independence, though he repeated his opposition to plans for minimum pricing of alcohol.

“There is no evidence that this will curb behaviour, but it will penalise those who consume our products responsibly,” he told The Scotsman.

The company, whose portfolio includes Bell’s and Johnnie Walker scotch whisky, and other brands such as Baileys and Smirnoff, said sales in Africa, the Far East and Latin America continued to swell revenues and profits, while Europe suffers from the downturn. It wants sales in the emerging territories to account for 50 per cent of sales from 39 per cent currently.

The group reported an 11 per cent hike in operating profits to £3.2 billion in the year to 30 June, with spirits fuelling more than 80 per cent of its growth as Johnnie Walker enjoyed an “exceptional” 15 per cent sales surge.

But the group’s performance in western markets was more difficult, with UK net sales down 2 per cent. Western Europe as a whole saw sales fall 4 per cent. But beer sales in Britain rose 6 per cent.

Shares have risen nearly 50 per cent over the past year and closed up 17.5p at 1,698p.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Despite heightened expectations, investors are raising a glass to another set of sparkling results.”

Diageo announced plans in June for a new distillery in Scotland and to expand a number of its 28 others as part of a £1bn investment drive.

Overall sales rose 8 per cent to £10.8bn, helped by recent acquisitions such as the Mey Icki raki brand in Turkey and Meta Abo beer in Ethiopia.

Walsh said talks over the acquisition of tequila brand Cuervo continue. “Diageo is a strong business, getting stronger, and the results we released today show that very clearly,” he said.