Emerging markets drive sales at Diageo

25th Aug 2011 08:04

FTSE 100 drinks giant Diageo posted a 2% increase in sales in the year ended 30 June, as strong growth in the emerging markets outweighed more subdued conditions in Europe.The firm also set its medium-term target of 6% organic top line growth, organic operating margin improvement ("with the first 200 basis points achieved in the next three years") and double digit earnings per share (EPS) growth.Shares rose 4.47% to 1,168p by 08:46 on Thursday morning.The company, famous for its Guinness-branded stout, reported that full-year sales reached £13.23bn, up from £12.86bn in the year ended 30 June 2010. Exchange rate movements held back reported sales by £252m, Diageo said.Net sales grew by just 1% in Europe, but rose by 5% in its International operations (including Latin American, Caribbean and Africa) and by 16% in Asia Pacific.Marketing spend was increased by 8% from £1.42bn to £1.54bn, as the company ramped up marketing in the emerging markets.Group volumes grew by 3% from 143.4m to 147.5m during the year.Pre-tax profit edged higher to £2.36bn, from £2.24bn while basic EPS rose 16% from 65.6p to 76.2p.The recommended full-year dividend was raised up to 40.4p per share, up from 38.1p the year before.The total cost of its operating review - which sought to cut costs of goods and operating costs by £80m per annum by the end of 2013 - is expected to be £160m, £77m of which was taken as an exceptional charge this year."Our leading brands and superior routes to market have delivered volume growth, positive price/mix, gross margin expansion and strong cash flow. We have strengthened the business, investing more behind our brands and in our routes to market and we have deepened our leading brand and market positions in the fastest growing markets of the world. In addition we have implemented changes to drive further operational efficiencies," said chief executive Paul Walsh.BC