Guinness Parent Diageo’s First-Half Profit Beats Estimates on European Rebound

By Steve Wynne-Jones
Guinness Parent Diageo’s First-Half Profit Beats Estimates on European Rebound

Diageo Plc reported first-half profit growth that beat analysts’ estimates, as the world’s largest distiller posted better-than-expected sales and gained market share in Europe.

Earnings before interest and tax rose 2 percent on a so- called organic basis in the six months ended Dec. 31, London- based Diageo said on Thursday. The median estimate of 21 analysts surveyed by Bloomberg was for growth of 1.5 percent. European sales rose 2 percent, better than the 1 percent expected by analysts, boosted by so-called reserve brands like Johnnie Walker and Ciroc vodka.

“For the full year we expect volume growth to drive stronger top line performance, margin to slightly improve and strong cash conversion to continue,” Chief Executive Officer Ivan Menezes said in the statement.

The rebound in Europe, where sales had been sluggish, is welcome as Diageo had been relying on emerging markets such as Africa, which should account for 20 percent of Diageo’s sales by 2020, Menezes has said. Last year it dissolved an African joint venture with Dutch brewer Heineken NV there so the distiller could have more control over its operations. That comes as slowing demand for its Smirnoff vodka in the U.S.

Diageo’s first-half organic sales rose 1.8 percent, compared with analysts’ estimates for growth of 1.6 percent. That was an improvement from the first-quarter’s 1.5 percent decline. Organic measures exclude the effects of acquisitions and currency fluctuations.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.