Emerging markets keep spirits up for distiller Diageo

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Diageo, the world’s biggest spirits group, said strongly growing emerging markets and a slow recovery in North America helped to offset weakness in Europe, prompting upbeat comments about meeting its 2012 targets.

The maker of Johnnie Walker whisky and Smirnoff vodka said it expected the emerging markets of Latin America, Africa and Asia to continue to grow and was encouraged by North America, while Europe had now stabilised with flat sales.

Chief executive Paul Walsh said with underlying half-year sales growing at 7 per cent the group was well-placed to meet its medium-term financial targets for 6 per cent annual sales growth, margin expansion and 10 per cent plus earnings growth.

He said that there was no sign of a major slowdown in emerging markets and some trading up to higher priced drinks in North America while in Europe 10 per cent plus growth in Germany, France and Russia offset weakness in Greece, Spain and Ireland.

“We are cautious as to the consumer and economic trends we will face in 2012 but these first-half results have positioned us well,” he said after the group beat forecasts with a 16 per cent rise in half-year earnings yesterday.

Mr Walsh said the group’s emerging market business grew 18 per cent in the half year, and now accounts for nearly 40 per cent of its business, driven by strong performances from Johnnie Walker whisky especially in Brazil, China and South Africa, and saw no sign of the slowdown seen by consumer goods groups Unilever and Reckitt Benckiser.

The London-based group is expanding into fast-growing emerging markets with recent deals in China and Turkey and expects half its turnover to come from these markets by 2015.

European chief Andrew Morgan said his business had been stabilised but there was no sign of an improvement in southern Europe.