Diageo Q1 Net Sales Drop; Sees Growth In FY Top Line

(RTTNews) - British beverages giant Diageo Plc (DEO, DGE.L) Thursday said its first-quarter net sales declined 1.7 percent on a reported basis and 1.5 percent organically, with weak volume. Despite North America, all regions recorded weak results organically.

Looking ahead, Chief Executive Ivan Menezes said, "We expect full year top line growth to improve on last year's performance. Our focus on our six performance drivers continues to build our capabilities and deliver the cultural change I want to see across the business. I am confident we are on the road to realise our full potential."

According to the firm, the quarterly results reflected the negative foreign exchange, mainly in respect of the devaluation of the Venezuelan bolivar, the effect of full consolidation of United Spirits Limited, as well as the termination of the transitional arrangements following the disposal of Jose Cuervo.

In its interim management statement, the company said its volume was down 3.5 percent, as Diageo again drove good mix from the stronger performance of its reserve brands, up 10 percent.

On a geographical basis, organic growth in North America edged up 0.1 percent, with broadly unchanged consumer trends.

European sales dropped 1.4 percent, hurt by declining net sales in Russia and Eastern Europe as a result of weak consumer confidence and the uncertainty arising from events in Ukraine. In Western Europe, net sales declined 1 percent.

In Africa, although Nigeria was weak, performance was strong in Diageo's Africa Regional Markets and East Africa.

Sales in Latin America and Caribbean region dropped 1.4 percent as good performance in main domestic markets were offset by weak sales in Brazil as price increases were taken in some states to align prices across the country.

Asia Pacific's sales declined 7.4 percent in the quarter, reflecting the decision to reduce inventory levels in South East Asia and the continued challenging trading environment in mainland China. In contrast, India and Global Travel Asia and Middle East delivered good growth.

In North America, consumer demand for mainstream brands is still constrained by weak consumer confidence in average income households. Meanwhile, Western Europe is now stable and the firm continues to expect full year performance to be flat. Diageo said emerging markets' performance remains weak with further currency weakness in a few markets and specific geopolitical situations in some areas.

In London, Diageo shares are currently trading at 1,747.50 pence, up 38 pence or 2.22 percent.