Diageo H1 Profit Down, Volume Climbs; Expects To Maintain Strong Momentum

(RTTNews) - British beverages giant Diageo Plc (DEO, DGE.L) reported Thursday lower profit in its first half even as sales were benefited by strong volume growth mainly with continued strong performance of reserve brands.

Chief Executive Ivan Menezes said, "We have already taken action to improve the performance of those brands and markets that have not performed as well as we would expect. This contributed to our stronger second quarter performance and I expect to maintain this momentum through the year."

For the first half, pretax profit was 1.64 billion pounds, compared to 2.13 billion pounds, previous year. Profit attributable to parent company's shareholders decreased 18 percent to 1.31 billion pounds from 1.60 billion pounds a year ago. Basic earnings per share were 52.2 pence, lower than prior year's 63.5 pence.

Earnings per share before exceptional items were 53.7 pence, compared to 62.6 pence last year. Restructuring benefits drove operating margin improvement of 28 basis points.

Sales for the six months were 8.72 billion pounds, compared to 8.01 billion pounds last year. Net sales were 5.90 billion pounds, down 1 percent from prior year's 5.93 billion pounds. Organic net sales in the half were broadly flat.

Volume for the period climbed 59 percent to 134.1 millions of equivalent units or EUm from 84.3 EUm last year. On an organic basis, volume dropped 2 percent with lower sales in all regions, except Africa.

The company noted that net sales in North America were in line with last year, given the slowdown in the US spirits market as a result of weaker pricing and the comparison against a strong first half last year.

In Europe, Diageo's performance reflected a stable performance in Western Europe, strong growth in Turkey, and tough trading conditions in Russia and Eastern Europe.

Further, the company announced an interim dividend of 21.5 pence per share, representing an increase of 9 percent on last year's interim dividend.

In London, Diageo shares were gaining 1.12 percent to trade at 1,984 pence.