Guinness maker Diageo posted an unexpected rise in quarterly organic net sales after a slower-than-expected decline in its key North America market.
Guinness sales were weaker in Ireland and Great Britain during the quarter, with the company attributing the single-digit decline to hotter weather.
Chief executive Dave Lewis called the first-quarter results a small step in the right direction.
The drinks company, which also makes Johnnie Walker whisky, posted organic net sales growth of 0.6 per cent for the three months ended September 30th, compared with a 0.4 per cent decline expected by analysts in a company-compiled poll.
READ MORE
Organic net sales declined 3.6 per cent in North America, its largest market, compared with a 6.7 per cent drop expected by analysts.
The group said organic net sales in its Europe, Middle East and Africa rose 2.4 per cent, with volumes up 4.4 per cent. Pricing was down 2 per cent on targeted price repositioning.
Growth in the region was led by Turkey, Africa and the Middle East, offsetting weakness in Italy and France.
Spirits and the ready-to-drink products were key drivers of growth. Johnnie Walker saw double-digit growth, while Baileys achieved mid-single-digit growth. That offset weakness in the Smirnoff and Tanqueray brands.
The beer sector, meanwhile, achieved low-single-digit growth, with Guinness growth in Africa and some central European countries offsetting a decline in Britain and Ireland sparked by hotter weather and increased competition.
The world’s largest spirits maker kept its organic net sales outlook broadly flat for the year.
Lewis said making the company’s offer more competitive remained Diageo’s biggest challenge but clear actions were underway.
“Whilst the market remains challenging, and volatility continues given the geopolitical uncertainty and impact of the ongoing conflict in the Middle East on energy, supply and distribution, results in the first quarter represent a small step in the right direction,” he said.
Lewis, who took over at the start of the year, has been implementing a turnaround plan for the drinks group, aiming to save about $1 billion. That includes cutting jobs, with Diageo’s annual report in August showing the company already had 2,000 fewer staff than the previous year. - Additional reporting: Reuters
