DRINKS giant Diageo reported lower than expected profits yesterday with the company seeing a shift away from pub drinking in Ireland.
On a group level Diageo said underlying sales were down 2% to £5.2 billion (€6bn) in the six months to December 31. Profits fell 3% to £1.63bn.
Alcohol sales in Ireland were down 10% and pub sales down 14% which the firm said was due to the economic weakness and a reduction in customer spend.
It said share gains in key markets and on key brands were not enough to offset industry declines in Ireland, Spain and Eastern Europe.
Diageo said marketing spend was reduced by 14%, reflecting the adverse trading environment in Iberia, Ireland and Eastern Europe. It said spend was focused behind fewer brands. Diageo also said it sees consumers shifting from on trade to off trade.
NCB analysts said overall, while the results are lower than expected in terms of profit split at the half year, the improved trading in quarter two and the prospects that this will be sustained in the second half of the year as restocking takes place underpins management’s decision to maintain guidance.
It is maintaining its forecasts given Diageo’s global dominance and its strong balance sheet.
Diageo chief executive Paul Walsh said: “There is polarisation between developed and emerging markets. Any signs of improvement in the US economy still have to translate into consumer confidence.”
The firm reduced costs by about £60 million in the first half by plant closures and job cuts which is half of its targeted £120m for the year.
Net sales of the company’s eight priority brands declined, except for Guinness.
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