Diageo upbeat despite Asia slowdown

Guinness-to-Smirnoff owner Diageo today warned that ongoing weakness in South Korea was weighing on one of its key growth markets.

Guinness-to-Smirnoff owner Diageo today warned that ongoing weakness in South Korea was weighing on one of its key growth markets.

Asia Pacific sales were one of the driving forces behind a strong performance for Diageo last year as emerging markets helped offset a sluggish period in western markets.

Diageo reported 2% sales growth in Asia Pacific in the three months to September 30, compared with 8% growth in the last financial year.

However, emerging markets still drove overall growth with Africa and Latin America reporting 11% and 16% respectively, more than offsetting the 1% decline in European sales in the period. North America reported a 6% jump in sales growth.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Diageo’s breadth of products and geographical diversification continued to save the day, with strong performances in areas such as North America, eastern Europe and South Africa.”

He added: “Today’s pause for breath comes after a year of outperformance, during which time the shares have risen 38% as compared to an 8% hike for the wider FTSE 100.”

Africa saw strong growth in spirits in South Africa and in beer in East Africa, Diageo said, while North America was boosted by US spirits sales.

The weak showing from South Korea overshadowed ongoing growth in South East Asia and China, especially in Scotch whisky.

Diageo chief executive Paul Walsh said: “The developed markets of Asia Pacific, especially Korea, are challenging but in the developing markets of Asia we have seen continued good performance.

“This performance together with the strong results we delivered in Africa and Latin America, and in the emerging markets of Europe has resulted in another period of double digit growth in our emerging markets business.”

Diageo is the world’s biggest drinks company and sells to 180 countries after ramping up its focus on emerging markets in recent years.

Whisky accounts for about a third of its sales and as well as Johnnie Walker, it makes Bell’s, J&B and The Singleton.

It recently announced plans to build a major new distillery and expand a number of its 28 sites as part of a €1.23bn investment drive.

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