Aside from the currency issues, Diageo says the new trading year has started well, with the volume of alcohol sold growing in the “mid-single digits”.
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“Our outlook for this financial year included the possibility that further currency weakness could impact demand for premium spirits in the emerging markets”, Diageo noted, saying it still expects to finish the year with improved revenues and margins.
“We have continued to deliver positive mix but, as we expected, price increases have been muted”.
Shore Capital analyst Phil Carroll said: “Volume growth seems to be particularly strong with it said to have grown mid-single digits, albeit against a weak comparative especially in USA spirits”.
The spirit giant, which also owns Guinness, put out a trading update ahead of its annual general meeting with shareholders on Wednesday and warned that profits are going to be £150 million lower than past year.
‘Our brands, our global footprint and our people give me confidence that Diageo can deliver strong and sustained performance’.
The firm said that while currencies were weaker in emerging markets it believed it would continue to grow volumes in these markets this year, which would lead to modest margin improvements. Diageo forecast in July that exchange-rate moves would strip £100 million pounds from operating profit.
Mr Menezes added that Diageo is working to build its brand in emerging markets with increased advertising and innovation, and is responding more quickly to changing consumer trends. The Group said its first half guidance for Diageo North America, of an organic net sales decline of 2%, is unchanged.
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But he retained his “outperform” recommendation and £20 price target on the shares.
