Weaker currencies to hit Diageo 2016 operating profits

23rd Sep 2015 07:18

(ShareCast News) - Adverse exchange rate movements will hit Diageo's 2016 operating profits by £150m as demand for premium spirits is impacted in emerging markets, the drinks company said on Wednesday."Therefore while currencies are weaker in these markets, we continue to believe that stronger volume growth in 2016 will lead to improved top line performance and that we can deliver modest organic margin improvement," said chief executive Ivan Menezes."As we achieve our productivity gains, from 2017 we expect to deliver mid-single digit organic top line growth on a sustained basis and operating margin expansion of 100 basis points over three years. "Menezes said the year had started well and "performance is in line with our expectations", with volume up "mid-single digit reflecting both improved volume growth trends and comparison against weakness at the start of last year, especially in US spirits"."We have continued to deliver positive mix but, as we expected, price increases have been muted. For the balance of the first half we face a tougher comparison against the phasing of shipments last year, particularly relating to innovations in US spirits and our first half guidance for Diageo North America, of an organic net sales decline of 2%, is unchanged."