Diageo reports increased profits
Guinness maker Diageo has reported annual profit growth that missed analysts’ estimates on weak sales in the US and Europe.
Net income climbed to £1.63bn (€2bn), or 65.4 pence a share, the drinks giant said today.
Diageo’s shares fell as much as 2.3pc to the lowest in almost two months.
Diageo gets about two-thirds of profit from Europe and North America, where consumers are cutting back and choosing cheaper brands.
Operating profit dropped 1pc in Europe, the company said, while North American earnings were unchanged.
The London-based distiller’s international unit, including Latin America and the Caribbean, increased profit by 25pc.
“Europe and North America we’re being a little bit cautious about, because while we see some good signs we also see signs that don’t tell us growth is here and consumer confidence is back in spades,” Chief Financial Officer Nick Rose said today on a conference call.
“Cautious is probably a fair description, not downbeat and pessimistic.”
Diageo was down 14 pence, or 1.3pc, to 1,052 pence at 8:21am in London trading, the second-biggest decline in the UK benchmark FTSE 100 Index.
The maker of Smirnoff vodka and Johnnie Walker whiskey said its operating profit, excluding acquisitions and disposals, rose 2pc, missing the 2.3pc median estimate of four analysts surveyed by Bloomberg News. The company had forecast “low single-digit” growth for the year.
“The global diversity of our business, together with the strength and range of our brands and the agility we have demonstrated gives us confidence that in fiscal 2011 we will be able to improve on the organic operating profit growth we have delivered this year,” Chief Executive Officer Paul Walsh said in the statement.
Net sales rose 5pc to £9.78bn. Excluding the effect of acquisitions, sales gained 2pc, missing the 2.3pc median estimate as a 3pc decline in Diageo’s ready-to-drink category offset growth in beer and spirits.
Diageo raised the dividend for the year by 6pc to 38.1 pence a share and said it expects to “at least” maintain that rate of growth in the current fiscal year.