Diageo AGM Statement and news

Diageo has announced that its sales and profit expectations for 2006 are in line with previous forecasts and also opts out of purchasing Montana New Zealand wine operations.

Diageo has announced that its sales and profit expectations for 2006 are in line with previous forecasts. As Paul Walsh, chief executive of Diageo said earlier this week, “At our results presentation in September we reported top and bottom line organic growth for the fifth consecutive year. On that occasion I said that we expected to continue that trend and that top and bottom line growth in fiscal 2006 would be similar to that delivered in the year ended June 2005 when we achieved 4% organic net sales growth and 7% organic operating profit growth. Trading in the first quarter of the new financial year supports this guidance.”

Emphasising the tough business environment in Europe in particular, he said, “In Europe, as we anticipated, the trading environment continues to be difficult with volume down on the prior period and the decline in the ready to drink segment continuing to adversely impact net sales growth.”
As for international markets, Walsh recorded, “strong” volume growth, and “the markets, which we identified as underperformers last year, Korea, Taiwan and Nigeria, are now making progress in line with our expectations.”

He also mentioned that, “The current oil price has led to higher costs for all consumer goods companies. Diageo is not immune to this but our cost structure does reduce our exposure and therefore we currently expect to contain these cost pressures within our overall guidance.
“In addition, if the recent strengthening of the US dollar were to be maintained the negative impact in fiscal 2006 of the year on year movement in exchange rates is estimated to be £45 million. This is a slight improvement from the £50 million adverse movement we estimated in September but if current rates were maintained we would expect a more substantial improvement in fiscal 07.”
Concluding he said, “Diageo is the world’s leading premium drinks company and we are well positioned to deliver our goal to consistently achieve our growth objectives.”

In addition The Drinks Business has learnt that Diageo has opted out of purchasing Montana New Zealand wine operations from Pernod Ricard who retain ownership after Diageo declined to exercise its purchase option following the acquisition of Allied Domecq by Pernod Ricard.