Diageo points out EM headwinds in first quarter

17th Oct 2013 07:38

- US spirits drives Q1 sales growth- Exchange rates to dent full-year profits- Emerging-market growth weakensDiageo, the drinks company behind Guinness stout and Smirnoff vodka, said that trading in the fiscal first quarter was resilient as strong growth in US spirits offset slowing growth in some emerging markets.However, the firm warned that exchange rate movements (based on current rates) were expected to adversely impact operating profit by £165m in the year to June 30th 2014.Organic net sales in the three months to September 30th increased by 3.1% year-on-year while volumes increased by 0.6%. On a reported basis however, net sales were flat due to the ending of a distribution agreement for tequila maker Jose Cuervo.Sales in North America rose 5.1% during the quarter with vodka brands Cîroc, Crown Royal and Ketel One helping to drive sales in US spirits.Western Europe sales declined by 1.1% but trends are said to be improving following the 4% fall in the year ended June 30th 2013. Diageo, however, said it still expected a low single-digit net sales decline for the full year.Elsewhere, growth weakened in the Africa, Eastern Europe and Turkey region due to a decline in sales in Russia, while trading in the fast-growing markets of Latin America and the Caribbean moderated. In Asia, growth was also poor due to government policies in China which hurt white spirit sales.Chief Executive Ivan Menezes said: "While there are headwinds in some emerging markets, including the impact of the government policies in China, there are also markets in which we continue to deliver robust growth and Diageo's strength is the diversity of our geographic breadth and broad category reach."BC