Strong sales of Guinness helps Diageo profits rise

A STRONG showing from Guinness in the Irish market has helped drive first-half performance at parent company Diageo.

Net sales of the black stuff in its home market grew 2%, year-on-year, in the six months to the end of December.

In the 12 months to last June — Diageo’s last full financial year — Guinness saw its first sales rise in Ireland for eight years, rising that year by 2.3%.

Diageo called the positive sales showing for Guinness “a real testament to the resilience of the brand against the backdrop of extremely difficult market conditions”.

These include significant changes to consumer drinking patterns, where home drinking now outweighs pub-based drinking by 55% to 45% and the fact that Irish consumers are expanding their choice of beverage more frequently. What’s more, Guinness’ market share on the island of Ireland has risen in all channels, except off-trade in the North.

On a group-wide basis, Diageo enjoyed a 16% year-on-year increase in first-half operating profits to £1.63 billion (e1.82bn) and saw net sales increase 18% to £5.06bn and earnings per share rise 21% to 45.6p.

Pre-tax profits rose £44m (e48.8m) to £1.41bn (e1.56bn) and the interim dividend of 13.9p for shareholders, represents a 5.3% increase on the same period last year.

On a global scale, volumes of Baileys were down by 5% year-on-year with net sales falling 4%, although a poor showing in the Iberian market was mainly to blame. Guinness also showed an 8% fall in international volumes and a 2% drop in global net sales, for the period.

Diageo has also warned of possible job cuts from its global workforce as the drinks group looks to make cost savings of £100m (e111m) in 2010.

The group has already announced that it has put on hold initial plans to invest e650m in developing a new brewery in Co Kildare.

The group said yesterday it expects to see consumer confidence reduce further, making the outlook for the second half of its financial year “difficult to predict”.

“In the second half, we will implement a restructuring programme designed to ensure that Diageo emerges from this challenging time with improved routes to market, even stronger brand positions and enhanced financial strength,” said group chief executive, Paul Walsh.

“We will be looking at all aspects of our business and it will be a number of months before we identify all viable saving options,” Mr Walsh added.