Diageo profits up on strengthened US sales

31-08-2006

Diageo, the world's largest liquor company, has reported a 42 per cent rise in annual profits, with increased sales across foreign markets including the US boosting the company's performance.

The UK-based manufacturer of Johnnie Walker whiskey and Smirnoff vodka said its net income for the 12 months to June 30th 2006 rose to £1.91 billion, up from £1.34 billion a year earlier.

Sales rose 8.7 per cent to £7.26 billion.

Diageo said that its North American market continued to deliver "industry beating top line growth", with the company's net sales across the region up seven per cent after the deduction of excise duties."

It attributed the strong performance of its US business to "proven marketing campaigns and a stronger execution of on and off trade sales programmes".

In Europe, the company said that measures to make its operations more effective had also helped drive operating profit and margin growth.

Diageo acknowledged that the decline in the ready-to-drink segment in Europe and the challenges inherent in the Irish beer market had adversely impacted upon top line growth across the region.

But the company stressed that its spirits brands in Europe and beer brands outside of Ireland had performed well.

Diageo chief executive Paul Walsh said he expected the alcoholic drinks group to deliver organic operating profit of at least seven per cent for the next financial year.

"With well-positioned brands and a more efficient and effective organisation, we enter the new financial year with confidence," said Mr Walsh.

"We expect that organic net sales growth will be in line with that achieved in the current year and we plan to deliver organic operating profit growth of at least seven per cent for the year and to return a further £1.4 billion to shareholders through our continuing buyback programme," he added.


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