Sales flat for drinks giant Diageo

Global drinks company Diageo has released full-year trading figures showing comparable sales remained flat for a second year.

The firm, which controls two-fifths of the Scotch whisky industry, reported Scotch sales down 5% by volume.

However, single malts from Scotland continued their rise, led by the Singleton in the US and Taiwan.

American whiskey sales were also strengthened by apple-flavoured bottlings.

The London-based company has lost momentum due to slowing growth in key markets, including South America and China.

It has had lower shipments, as wholesalers have pulled back on stock-holding.

Profits up

Despite flat comparable sales, Diageo posted a rise in pre-tax profits - from £2.7bn to £2.9bn. A big increase in volume of sales was driven by the acquisition of United Spirits in India, which boosted reported net sales by 5%.

Currency movements had an impact on its results, most significantly the Venezuelan bolivar and the Russian ruble. That cut £370m from sales and £100m from operating profit, once translated into sterling.

Some markets saw Diageo facing tough price competition, including Smirnoff vodka in the US and Johnnie Walker whisky in Brazil.

Notable improvements in sales were reported for Johnnie Walker in Mexico, while Guinness returned to growth in its UK and Irish home market.

American Blonde Lager drove Guinness sales up in the US. Net sales were up 6% in Africa.

Other developments during the financial year included a buyout of the remaining half of the Don Julio tequila brand, the sale of Gleneagles hotel and resort in Perthshire, and a shifting of strategy in South Africa to focus on spirits.

Sales challenges

Diageo chief executive Ivan Menezes said the performance reflected the company's sales challenges, and that further changes were under way to sharpen the business.

He added: "We have consistently applied a long-term perspective in making changes, despite the short-term challenges we have faced from an external environment where currency volatility continues to impact the emerging market consumer."

He claimed the current financial year would see volume of sales improve, rising to about 5% organic sales growth from 2017, with improved margins.