E-Malt.com News article: 3190

UK: Diageo PLC, the beverage company behind Guinness beer and Smirnoff vodka, said its earnings surged in its latest fiscal year from a year earlier when it sold the Burger King restaurant business at a heavy loss. Diageo said Thursday it earned 1.39 billion pounds (US$2.49 billion) in the fiscal year ended June 30, up from 50 million pounds in fiscal 2003. The 2003 results reflected the December 2002 sale of Burger King Corp., which generated a 1.44 billion pound (US$2.58 billion) loss last year.

Diageo said pretax profits excluding exceptional items fell to 2.06 billion pounds (US$3.69 billion) from 2.10 billion pounds a year earlier. Sales dipped to 8.9 billion pounds (US$15.9 billion) from 9.3 billion pounds a year ago. Analysts said Diageo's performance this year has been mildly disappointing with profits down in some key markets. In midafternoon trading, Diageo shares were down 1.2 percent at 6.75 pounds (US$12.08).

"Europe remains our key business challenge and North America continues to provide our biggest opportunity," said chief executive Paul Walsh. Diageo has transformed itself into a drinks-dominated business after acquiring Seagrams' stable of brands in 2001, then selling the food businesses Pillsbury Co. and Burger King in rapid succession.

Its biggest brand, Smirnoff vodka, sold 24.2 million units over the past year, up 5 percent; Johnny Walker whisky reached 11.7 million, up 9 percent; Guinness stout, 11.6 million, up 2 percent; Bailey's Irish Cream liqeur, 6.6 million, up 7 percent; and Captain Morgan rum, 6 million, up 12 percent.

Diageo said profit fell in its key North American market despite buoyant sales, thanks to the U.S. dollar's sharp depreciation over the past year versus the pound.

The company said North American sales volume rose 10 percent, but revenue declined to 2.7 billion pounds (US$4.83 billion) from 3.1 billion pounds in 2003. North American operating profit fell to 694 million pounds (US$1.24 billion) from 708 million pounds a year earlier.

Diageo's worst-performing market over the past year has been Ireland, where sales of the group's flagship beer, Guinness, and other brands have taken a hit from the country's decision in March to ban smoking from pubs and other enclosed businesses.

The company said sales of its products in pubs, where it is the dominant distributor, had slipped 6 percent, while sales in liquor stores, where it faces much more competition from discounted imports, had risen 7 percent. The numbers reflected the fact that smoking pub-goers have increasingly opted this year to drink at home rather than in pubs.

Overall, Diageo said net Irish sales of its major beer brands - Guinness, Harp, Carlsberg and U.S.-licensed Budweiser - were down 3 percent, while Bailey's and Smirnoff slumped 11 percent.



06 September, 2004