Emerging markets drive Diageo's growth

Drinks brands owner Diageo has made a solid start to its new financial year, with sales growth in line with expectations.

In the three months to the end of September the Guinness brewer saw organic net sales growth of 5%, while volume was up 2%.

Sales growth was achieved despite Europe's organic net sales being down 1% on last year. Southern Europe and Ireland continued to be affected by the economic situation in those markets while in France consumer demand remains weak following the duty increases implemented in January.

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Latin American & Caribbean (+16%) and Africa (+6%) were the star performers in terms of organic net sales growth, while growth of 6% in North America was also very solid, driven by robust demand for Diageo's spirits brands in the US. Asia limped in with 2% like-for-like growth.

On a reported basis, net sales grew 6% in the quarter, against the comparable period. Net sales from acquisitions, Mey ki, Meta Abo, Ypica and Shuijingfang, totalled £79m and there was a negative foreign exchange impact of £49m.

Net borrowings at the end of September were £8,019m, up from £7,570m at the end of June, partially reflecting the £284m paid to acquire Ypica.

"The strength of our brands and our routes to market, coupled with the investments we have made in faster growing markets continue to drive the performance of our business," said Paul Walsh, Diageo's Chief Executive.

"While the consumer environment in Western Europe remained challenging we delivered over 30% net sales growth in the faster growing markets of Europe, especially in Turkey where we have driven share gains from the successful integration of Mey ki," Walsh added.

"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," Walsh continued.

Shares of Diageo were down 34.5p to 1748.5p shortly after the trading statement was released.

JH