Diageo posts marginal revenue growth in full year as adverse foreign exchange hits sales


British drinks maker Diageo Plc reported its full year 2018 results on Thursday, with marginal revenue growth of 0.9% for the period ending 29 June 2018.

The company behind such brands as Johnny Walker Scotch whisky and Guinness Stout recorded £12.2bn in net sales for the year as against £12bn from the previous year. The firm noted that adverse foreign exchange headwinds impacted net sales. Total volumes declined 1%.

However, net profits rose 14% to £3bn from £2.6bn in 2017.

Commenting on the results, Ivan Menezes, chief executive of Diageo Plc said, “Diageo has delivered another year of strong consistent performance. Organic volume and net sales growth is broad-based across regions and categories.”

The firm said it returned £1.5bn to shareholders through a share buyback in 2017, and due to the strong cash flow generation in 2018, the board has decided to return additional £2bn in the 2019 financial year.

Looking at the group’s performance by region, North America reported negative 1% net sales growth on the back of a 2% volume lift. Europe and Turkey grew 4% in net sales, helped by a 4% volume rise.

Despite growing volumes by 3%, net sales in Africa fell 4%. The company notes that while Nigeria and East Africa recovered from the first-half impact of uncertainty following Kenya’s General Election, there were weaknesses in the firm’s Africa Regional Markets due to challenging conditions in Cameroon and Ethiopia, and a competitive environment in South Africa.

In Nigeria, net sales grew 13%, thanks in part to a 15% growth in beer sales, buoyed by strong growth of Dubic post-launch in the prior year and Guinness, which grew 24%, helped by on premise activation against football, leveraging the English Premier League and the FIFA World Cup. Net sales in Nigeria spirits grew 28% as a result of double-digit gains in mainstream spirits, driven by innovation launches and new formats.

East Africa saw net sales growth of 4%, with beer sales rising 4% as decline in Senator Keg in Kenya was offset by the successful launch of Serengeti Lite in Tanzania and 8% net sales growth of Guinness. Mainstream spirits also performed strongly, driven by improved distribution, consumer promotions and new launches.

In South Africa, net sales fell 3%, impacted by a decline in mainstream spirits (Smirnoff 1818 and primary Scotch whiskies) which were impacted by price increases and increased competitive environment.

The group saw a strong performance in Asia Pacific, with a 3% net sales growth despite a 7% volume decline.

Latin America and Caribbean recorded 2% net sales growth on a 5% volume lift.

Diageo said it would stand by its mid-term guidance of consistent mid-single-digit organic net sales growth and 175 basis points of organic operating margin expansion for the three years ending 30 June 2019.

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