Diageo half-year sales boosted by strong demand in Asia, U.S.

Diageo Plc, on Thursday reported a 6% sales growth for the first-six months of its financial year ending on 31st December 2018.

The British drinks maker behind such brands as Johnny Walker Scotch whisky and Guinness Stout said that revenue rose to £6.9bn ($9.07bn) compared to £6.5bn in the previous year, driven by stronger demand from China, India and the U.S.

However, net profit declined by 4% to £1.97bn, impacted by adverse foreign exchange headwinds in key markets and the disposal of United National breweries (UNB), a South African-based sorghum business which resulted in an exceptional loss of £8m.

Commenting on the results, Ivan Menezes, Chief Executive of Diageo Plc, said, “Diageo delivered broad-based volume and organic net sales growth across regions and categories. We continue to expand organic operating margins while increasing investment in our brand ahead of organic net sales growth.”

The company said it intends to buy back additional £660m of shares from investors, increasing its total buyback to £3bn through June ending 2019.

Looking at the group’s performance by region, Africa net sales grew by 6%, with strong performances in East Africa, Africa Regional Markets and South Africa, which offset declines in Nigeria. Diageo said that net sales in Nigeria fell by 4% as growth in Guinness and double-digit growth in spirits was more than offset by competitive pressure in the lager segment.

East Africa saw 13% sales growth, with Kenya benefitting from lapping prior year weakness, driven by political uncertainty following its presidential election and Tanzania continued to grow double-digit.

In Africa Regional Markets, sales rose 6%, with growth in Ghana and a return to growth in Cameroon as it lapped prior year challenges in the distribution network. South Africa saw a 4% sales growth, buoyed by strong spirits performance.

Elsewhere, North America delivered 6% sales growth, with disposal of 19 brands to Sezerac in the United States positively impacting sales. Canada also had a strong showing with 5% sales rise, as the spirits business lapped a weaker comparative in the same period from the previous year.

Europe and Turkey delivered 5% sales growth, driven by strong performances in the UK, Ireland and Continental Europe.

Latin America and the Caribbean grew 9% in sales, with strong performances in Mexico, Colombia and Caribbean and Central America (CCA).

Asia Pacific region returned the strongest growth with 13% sales leap, driven by strong performances in Greater China, India, South East Asia, Travel Retail Asia and Middle East.

Looking forward to the second-half, the company said it expects to deliver mid-single digit organic net sales growth for the year and to expand operating margins with previous guidance of 175 basis points for the three years ending June 2019.

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