New markets raise Diageo profits

The growing thirst of emerging markets for whiskey, gin and vodka cheered Guinness and Baileys firm Diageo today as its western markets continued to suffer a debt hangover.

The group reported an 11% profits hike in the year to June 30, with spirits fuelling more than 80% of its growth as Johnnie Walker whiskey enjoyed an “exceptional” 15% sales surge, driven by strong demand in countries such as South Africa, Brazil and Asia Pacific.

And Smirnoff enjoyed double-digit growth in Africa and Latin America, helped by a marketing campaign featuring Madonna.

But its performance in western markets was more difficult, with UK net sales down 2% despite strong performances for Smirnoff Red, Guinness and Red Stripe.

Western Europe as a whole saw net sales fall 4% as the debt crisis squeezed people’s spending power, particularly in Spain, Portugal, Greece and Italy.

But with sales in emerging markets up 15% and now accounting for nearly 40% of its sales, Diageo reported an 11% rise in operating profits to £3.2bn (€4bn), while bottom-line profits were up nearly a third.

Shares have risen nearly 50% over the past year and were up a further 1% today.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Despite heightened expectations, investors are raising a glass to another set of sparkling results.”