Spirits spur Diageo profits

Drinks giant Diageo’s leading spirits brands today helped the Guinness maker to a strong profits performance.

The maker of Johnnie Walker whisky and Smirnoff vodka said US spirits sales continued to outperform competitors and helped offset declining beer markets in Ireland and the UK.

Diageo’s underlying operating profits for the year to June 30 were 9% ahead at €3.2bn, with similar profits growth expected in the current year.

In Ireland, Guinness volumes declined by 9% over the full year and were down 3% in the UK, though it is now the number four 'beer' there. Overall sales of Guinness rose following stronger international sales and a marketing push.

Stronger sales of Baileys liqueur, Smirnoff and Johnnie Walker helped Diageo increase underlying operating profits 12% to €1.2bn in the US.

But the company was also encouraged by a stronger second half performance from European sales, with growth seen in the Irish, UK and Spanish markets.

A decision to concentrate on spirits in the UK instead of the struggling beer market led to overall net sales growth of 1% in the second half, driven by an 11% sales rise for Smirnoff.

Despite falls in Guinness volumes at home, Diageo said the iconic pint in the UK following positive reaction to a new advertising campaign.

Higher sales of Johnnie Walker in Eastern Europe and Russia led to flat underlying profits at €1bn.

Diageo, whose overall net sales were 7% ahead at €11bn, added that the impact of the stronger pound cut operating profits by €134m over the year.

Chief executive Paul Walsh said: “While we watch for any impact the current volatility in financial markets will have on broader trading, the investments we have made in brands and markets this year have created an even stronger platform for the future.”