Diageo full-year profit up 17 pct as margins rise

AP News
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Posted: Aug 25, 2011 3:49 AM
Diageo full-year profit up 17 pct as margins rise

Diageo PLC, the world's largest maker of spirits, on Thursday reported a 17 percent rise in full-year profit, boosted by increased sales of higher-priced brands and a reduced tax bill.

For the year ending June 30, the maker of Johnnie Walker whisky and Guinness stout reported a profit of 1.9 billion pounds ($3.1 billion), up from 1.63 billion pounds a year earlier.

Sales rose 2 percent to 9.94 billion pounds. The tax rate fell from 21 percent to 14.5 percent.

The company raised its full-year dividend by 6 percent to 40.4 pence.

Diageo shares were up 4.9 percent at 1,173 pence as trading opened on the London Stock Exchange.

Chief Executive Paul Walsh forecast sales growth of 6 percent in the medium term.

"Medium-term guidance looks to be setting targets that are tough but achievable and also make Diageo look attractive as an investment proposition if achieved," said Phil Carroll, analyst at Shore Capital.

Diageo reported improved margins driven by a 24 percent increase in sales of premium "reserve brands" including Johnnie Walker, Kenel One vodka and Tanqueray No. 10 gin, and a 16 percent increase in sales of scotch in emerging markets.

Sales rose 3 percent in North America, 9 percent in Asia Pacific and 13 percent in other international markets. Sales in Europe dropped 3 percent, dragged down by lower sales in Greece, where sales dropped by a third, and an 18 percent decline in Spain and Portugal.

Diageo did not break out results for the second half of the year.

"We have strengthened the business, investing more behind our brands and in our routes to market and we have deepened our leading brand and market positions in the fastest growing markets of the world," Walsh said. "In addition we have implemented changes to drive further operational efficiencies."

Diageo reported spending 111 million pounds on a restructuring program announced in May, including 77 million pounds in payments to employees who were laid off.