Diageo reveals sales fizz, but warns on outlook

14th October 2010, Comments 0 comments

Diageo, the world's biggest producer of alcoholic drinks, said Thursday that sales grew in the first quarter of its financial year but cautioned over the fragile outlook in developed nations.

Sales rose five percent to 2.063 billion pounds (2.3 billion euros, 3.3 billion dollars) in the three months to the end of September, compared with the same period of last year, the Guinness maker said in a trading update.

"Our first quarter performance is in line with our expectations with good volume growth and a modest improvement in the level of price/mix," said Chief Executive Paul Walsh.

However, he added: "The year has started as we thought it would with a fragile economic and consumer environment in the developed markets and stronger consumer demand in the developing markets."

The group experienced solid growth at its international division -- which covers Latin America and the Caribbean, Africa and the Middle East -- and also at its Asia Pacific and North America wings.

"The continued strong performance of all three hubs in international, together with further improvement in our performance in Asia Pacific, remain the key drivers of organic net sales growth in the quarter," said Walsh.

"Diageo North America also posted stronger growth in this quarter than in the prior year."

However the group, which also produces Baileys liqueur, Johnnie Walker whisky and Smirnoff vodka, added that drinkers in Greece and Spain were cutting back following major taxation hikes.

"As expected we face a challenging trading environment in Greece and in Spain net sales were down markedly in comparison to the first quarter last year when there was a buy-in ahead of duty increases," Walsh said.

"Overall, however, the consumer environment in Europe is slightly weaker than we experienced in the prior year."

© 2010 AFP

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