Drinks giant Diageo (LON:DGE) is looking for volume growth to offset unhelpful exchange rate movements in emerging markets.
Advertisement
Despite this, the company – which is holding its annual general meeting today – revealed that sales volumes had grown – although this was partially down to a weak start in the same period past year .
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.
“The year has started well and performance is in line with our expectations”, said Diageo Chief Executive Ivan Menezes in a statement on Wednesday.
“As we achieve our productivity gains, from 2017 we expect to deliver mid-single digit organic top line growth on a sustained basis and operating margin expansion of 100 basis points over three years”.
“We are delivering the change which will further strengthen this business and deliver our performance ambition: building our brands with marketing and innovation and enhancing our distribution platform through investment in our route to consumer”, said Menezes. But the company said continued weakness of currencies outside the United Kingdom would increase the expected impact on profit for the year to June 2016.
Diageo’s brands include Smirnoff, Johnnie Walker, Baileys and Guinness.
Menezes didn’t break out what emerging markets Diageo is having currency troubles in but a fair guess would be China.
Advertisement
At current rates, currency weakness should reduce Diageo’s operating profit by 150 million pounds in fiscal 2016, compared with a prior forecast for a 100-million-pound hit.
