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Diageo toasts full-year net sales and profits

Diageo’s organic net sales increased by 5% to £12.2 billion (US$16.1bn) in its 2018 fiscal year, described as a “strong, consistent performance” for the UK-based group.

Smirnoff was Diageo’s only ‘global giant’ to decline in 2017/18

Reported net sales growth was slower – 0.9% – due to exchange rate movements. Looking ahead, Diageo expects currency fluctuations will adversely impact its 2019 net sales by £70m and wipe £10m off its operating profit.

Operating profit for the year to 30 June 2018 grew 3.7% to £3.7bn. Reflecting the Johnnie Walker maker’s “strong cash flow”, its board has approved a share buyback programme worth £2bn for the coming year.

“These results reflect the high performance culture we have created in Diageo, the ongoing rigorous execution of our strategy, our focus on the consumer and our ability to move swiftly on trends and insights,” said Diageo CEO Ivan Menezes.

“During the year we returned £1.5bn to shareholders through a share buyback. We have delivered another year of strong cash flow generation in F18. Consequently, the board has approved an additional share buyback programme of up to £2bn during F19.

“The changes we have made in the business and the shifts in culture we continue to drive, ensure we are well placed to capture opportunities and deliver sustained growth.”

On an organic basis, all of Diageo’s regions experienced growth in 2017/18. Asia Pacific performed the best, with net sales growth of 9%.

The only category to decline in the year was vodka, which experienced an organic net sales loss of 1%. The world’s largest vodka brand, Smirnoff, declined by 2%, while Ketel One and Cîroc declined by 1% and 2% respectively.

Tequila saw the fastest rate of growth at 40% thanks to strong double-digit gains for Don Julio, which surpassed sales of 1m cases in 2017. Diageo’s Tequila portfolio was boosted last year with the acquisition of Casamigos Tequila for US$1bn.

With the exception of Smirnoff, all of Diageo’s ‘global giants’ experienced positive performances, however, movements were more mixed for its ‘local stars’.

All of the group’s standard whiskies, such as Buchanan’s and J&B, declined – except Black & White, which reported organic growth of 33%.

In the year ending 30 June 2019, Diageo expects to deliver mid-single-digit organic net sales growth.

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