Diageo pins hopes on brand loyalty
Friday 29 August 2008
Global drinks giant Diageo lowered its growth forecast yesterday against a background of rising costs and a slowing global economy, as it delivered flat full-year pre-tax profits.
However, the company toasted a strong performance from its biggest brands,including Guinness, Smirnoff vodka and Johnnie Walker,as global consumers refuse to sacrifice their favourite tipples.
Diageo's chief executive, Paul Walsh, said: "Although times are challenging, they want brands they can trust so [strong] brands will prevail. The performance of our brands is very healthy."
The company tweaked its guidance for operating profit growth for the current financial year to between 7 per cent and 9 per cent, revised down from 9 per cent previously. Analysts at Cazenove said they believe the upper end of this range is "optimistic", given the slowdown in global economic growth, but the lower end of the range is "realistic".
Diageo said its input costs rose 3 per cent for the year to 30 June, and it expects them to rise 5 per cent, or £150m, in the current financial year.
Nick Rose, Diageo's finance director, said: "Some things such as barley and corn are up dramatically, but some things have hardly moved."
For the year to 30 June,Diageo delivered flat pre-tax profits of £2.09bn, on sales that jumped 7 per cent to £10.64bn.
Of its key brands, Johnnie Walker sales grew by a tasty 12 per cent, Smirnoff vodka by 10 per cent and Guinness was up by 6 per cent.
Mr Walsh said: "With Guinness, we have outperformed the UK and Irish beer market and we have shown strong growth in Africa."
Shares in Diageo rose 20.5p to end at £10.
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