Diageo profit up 7% despite fall in sales

Diageo’s first-half organic sales rose 1.8 per cent, compared with analysts’ estimates for growth of 1.6 per cent. That was an improvement from the first-quarter’s 1.5 per cent decline.

But the group said adverse exchange rates and the impact of the disposal of non-core assets reduced net sales and operating profit before one-off items by 5% to £5.6bn and by 7% to £1.72bn respectively.

“For the full year we expect volume growth to drive stronger top line performance, margin to slightly improve and strong cash conversion to continue”. Performance of its key brands also improved, he pointed out – there was growth in the top six brands, which account for 50% of the business – and also cost productivity.

Diageo, the company that owns Guinness, has reported a fall of £122m in its operating profits in the six month period ending December 31.

Beer net sales were up 3%, with Guinness net sales up 4% driven by strong Rugby World Cup activation. Net sales in Mexico and Colombia, in particular, performed well, with good growth for new flavours of Bailey’s Irish cream. Net sales were £5.6bn, earnings per share were 56.1 pence. Otherwise, Smirnoff performed well, as did Captain Morgan rum, while its Johnnie Walker, Bulleit and Don Julio whiskeys all saw sales grow.

That comes as slowing demand for its Smirnoff vodka in the US. Guinness grew 2.1pc in volume in Republic of Ireland, with growth of 7.9pc in the off trade and 1.4pc in the on trade. CEO Ivan Menezes stated: “While trading conditions remain challenging in some markets, Diageo’s brands, capabilities in marketing and innovation and our route to consumer have proved resilient”.

Meanwhile Reserve brands net sales were up 31%, driven by Cîroc, scotch malts and Tanqueray No. Ten. As such, he noted that there was “resilience and momentum and that’s why I have the confidence that this momentum will improve as we go into the second half and into the medium-term”.