Diageo hurt by weak emerging markets growth

Kasmira Jefford
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DIAGEO posted a lower than expected rise in first quarter sales yesterday as strong growth in the US was dampened by a slowdown in emerging markets such as Africa and Russia.

The world’s largest drinks company, which owns brands including Guinness and Smirnoff, said organic sales rose by three per cent in the three months to 30 September, missing consensus forecasts of four per cent.

Credit Suisse analysts said that despite the slow start to the year the first quarter “has always been a very small quarter” for Diageo, accounting for around 20 per cent of sales.

Diageo’s Africa, eastern Europe and Turkey division – with sales up 1.3 per cent – suffered the weakest growth, particularly in Russia, where the company faced tough comparisons after strong growth last year, and Nigeria and Ghana.

Sales rose 10.9 per cent in Latin America and the Caribbean, 5.1 per cent in North America, and by just 0.6 per cent in Asia Pacific.

Meanwhile in western Europe sales fell 1.1 per cent and chief executive Ivan Menezes warned that he still expects “a low single digit net sales decline for the full year”.

He also said the Chinese government’s crackdown on luxury gift-giving has led to a “substantial fall” in net sales in Diageo’s Chinese white spirit subsidiary ShuiJingFang.

A recent weakening of various currencies against the US dollar has also hit results and Diageo said yesterday that foreign exchange movements would wipe £165m off full-year operating profits.