16th Oct 2014 06:17
LONDON (Alliance News) - Johnnie Walker and Smirnoff maker Diageo PLC Thursday reported a 1.5% decline in organic net sales for the first quarter, hit by a significant fall in volume, on the back of weaker trading in emerging markets, and de-stocking issues in some of its key markets.
The results were in the middle of market expectations. Analysts were expecting between a 1% to 2% decline in group organic sales for the quarter.
Diageo, the world's largest spirits producer and a major producer of beer and wine, said organic net sales were down 1.5% in the three months to September 30, with volumes down 3.5%. On a reported basis, net sales declined 1.7% in the quarter, partly hit by the devaluation of the Venezuelan bolivar.
Diageo said a number of factors were at play driving negative growth, including de-stocking in Latin America and South East Asia, a downturn in the US and prolonged weakness in emerging markets, once its driving force behind growth in the business.
"Consumer trends in most markets are unchanged and our first quarter performance is in line with our expectations given the prior year comparison of the performance of our US Spirits & Wines business and the de-stock we have implemented in South East Asia," said Chief Executive Ivan Menezes in a statement.
"We expect full-year top-line growth to improve on last year's performance," he added.
Diageo said it is seeing a market slowdown in demand and growth in emerging markets, while developed markets like Western Europe have begun to stabilise. It is also seeing growth constrained by currency moves.
Diageo said it expects currency moves to wipe around GBP95 million off its operating profit for the year ending June 30, 2015, with a "hyperinflation charge" of around GBP50 million.
In North America organic net sales were up 0.1% and in Europe down 1.4%. In Latin America and the Caribbean sales were down 1.4%. The biggest sales decline was in Asia Pacific, where organic net sales fell by 7.4%. In Africa, sales were flat, Diageo said.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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