Change in tax rates forces Diageo to write off €624m
By Vincent Ryan
Friday, February 10, 2012
A change in Dutch tax rates has resulted in Guinness owner — Diageo — writing off €624 million in deferred tax assets.
Diageo, which own Guinness, Baileys and Bushmills finalised tax negotiations with authorities in the Netherlands, resulting in a loss of future tax reductions to the value of over half-a-billion euro.
Diageo said that the negotiations had resulted in a promise to keep the company’s effective tax rate at about 18%, compared to 21.8% in the second half of 2010.
Despite this, Diageo have reported solid growth globally. In Western Europe, sales declined by 2%, but in Ireland Diageo maintained dominance, with one-in -three long drinks sold in bars being Guinness.
However, there was a 2% decline in Guinness sales in Western Europe. The slack was taken up by exports, with a 5% growth in demand for the stout globally.
Diageo Ireland director David Smith said: "It is very positive to see that Guinness is still the best selling beer in Ireland with a strong value share of 32%. The last six months has seen Diageo’s exports of Guinness, Baileys and Bushmills from Ireland growing strongly. This is more good news for the Irish agri sector and the economy overall. Our recent €153m brewing investment announcement at St James’s Gate will ensure exports become even stronger over the coming years."
The investment in St James’s Gate will consolidate their Irish brewing operations. Breweries in Kilkenny and Dundalk will be closed in 2013, with the loss of 99 jobs.
Smithwick’s continues to perform well in Ireland and is also proving popular in export markets such as USA and Canada, according to Diageo. Korea is the latest export market to be targeted for the ale.
Diageo chief executive, Paul Walsh, said: "Globally Johnnie Walker grew 15%, Smirnoff returned to growth, Guinness grew 5% and our reserve brand portfolio grew 25%. Our strategic brands grew 8% and the strongest performing categories were scotch, up 14% and vodka, up 13% while our beer brands delivered 7% organic net sales growth.
"We are cautious as to the consumer and economic trends we will face in 2012 but these first half results have positioned us well and they have demonstrated that Diageo has the brands, the routes to market and the people to deliver our medium term guidance. The increase of 7% in the interim dividend signals our confidence that we are making a strong business stronger," he said.
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This appeared in the printed version of the Irish Examiner Friday, February 10, 2012
