Guinness maker Diageo profits lifted by emerging markets

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Diageo, the world's biggest producer of alcoholic drinks, said Thursday that annual net profit jumped nearly 17 percent, as rapid emerging markets growth offset weak demand in Europe and North America.

Profits after tax rallied to £1.9 billion (2.15 billion euros, $3.11 billion) in the group's 2010-11 financial year to June, Diageo said in a results statement.

That compared with market expectations of £1.94 billion, according to analysts polled by Dow Jones Newswires.

The British brewing giant, which makes Guinness stout, Johnnie Walker whisky and Smirnoff vodka, said the figure rose from net profits of £1.63 billion during the previous 2009-10 fiscal year.

"Diageo is a strong business as these results show. Our leading brands and superior routes to market have delivered volume growth, positive price/mix, gross margin expansion and strong cash flow," said chief executive Paul Walsh.

"We have strengthened the business, investing more behind our brands and in our routes to market and we have deepened our leading brand and market positions in the fastest growing markets of the world.

"In addition we have implemented changes to drive further operational efficiencies," he said

Sales grew two percent to £9.9 billion, aided by a string of strategic acquisitions in China, Tanzania, Turkey and Vietnam.

"Diageo expanded its presence in faster growing markets -- a controlling stake in Serengeti Breweries in Tanzania, an equity stake in Halico in Vietnam, the acquisition of Mey Icki in Turkey, an additional investment in ShuiJingFang in China and a controlling stake in Zacapa super premium rum, totalling £1.6 billion," the group added in the statement.

Annual sales in the international and Asia Pacific divisions soared by 13 percent and nine percent respectively, but North America grew by just three percent.

And Europe suffered a three-percent decline, as the group was hit by the troubled debt-laden economies of Greece, Italy and Spain.

London-listed Diageo also produces Baileys liqueur, Captain Morgan rum and Tanqueray gin.

Investors welcomed the results, sending the group's share price soaring 4.56 percent to 1,169 pence in late afternoon deals, while the FTSE 100 index was 0.88 percent lower at 5,160.14 points.

"With strong brands, premium pricing power and strong distribution, Diageo is well placed to benefit from the growing aspirations of emerging market consumers," said Jonathan Jackson, head of equities at brokerage Killik & Co.

© 2011 AFP

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