Diageo's half yearly revenue growth supported by premium brands

Thursday 31 January 2013 22.44
Diageo say conditions in Ireland and UK remain challenging
Diageo say conditions in Ireland and UK remain challenging

Diageo, the world's biggest spirits group, reported steady sales growth in the second half of 2012.

The growth was driven by price rises and the growth in the US of premium brands like Ketel One vodka and Bulleit Bourbon.

The maker of Guinness and Johnnie Walker whisky saw sales grow 5% to £6.04 billion sterling in the half year to December, while pre-exceptional earnings per share rose 9% to 60.9 pence.

Analysts had expected sales to rise 5.1% to £6.05 billion.

The company described conditions in the UK and Ireland as "challenging", adding that sales of Guinness are still falling in this part of the world and in the US. But sales of Bushmills whiskey rose by 28% in Ireland over the second half of last year, while they were also up 49% in Russia and Eastern Europe.

Underlying sales in North America, which accounts for around a third of group sales, grew by 5%, supported by price increases and double-digit growth of premium brands.

European sales, which make up about 28% of Diageo's total, fell by 2% as fast-growing Turkey, Russia and eastern Europe helped compensate for a fall of 19% in crisis-hit southern Europe.

Faced with sluggish growth in recession-hit European economies, Diageo has been on a buying spree as it looks to tap burgeoning middle classes in Africa, Asia and Latin America, where it aims to make around half of its turnover by 2015.

Diageo saw underlying sales in Asia, which now accounts for abut 14% of sales, rise 6%, weighed down by a contraction of the whisky market in South Korea that Diageo already flagged when it reported July-September results.

Pernod Ricard, the world's second-largest spirits group and the firm behind Absolut vodka and Mumm champagne, said last month it faced slowing growth in Asia, including the key China market.

It reports results on 14 February.