FDBusiness.com

Diageo has reported a 5% increase in organic net sales to £6.039 billion with 1% organic volume growth for the first six months ended December 31 2012, driven by strong sales in Latin America and the Caribbean. The drinks group also achieved 9% organic operating profit growth to £2.03 billion (pre exceptional items).

The increase in sales was driven by volume growth in the faster growing markets, price increases which more than covered inflation, and strong growth of the US spirits business reflecting an improved pricing environment there. The breadth of Diageo’s business across global markets and categories meant that despite some specific market challenges and volatilities, the group’s overall performance was strong.

Although the trading environment in Europe remained difficult, faster growing markets contributed 42% of Diageo’s net sales in the half and delivered organic net sales growth of 14% and operating profit growth of 21%. Acquisitions made in the past two years added £0.3 billion to net sales in the half.

Paul Walsh, chief executive of Diageo, comments: “These results reflect the global strength of our strategic brands, our leadership in the US spirits market and our increasing presence in the fastest growing markets of the world. Our expanding reach to emerging middle class consumers in faster growing markets was the key driver of our volume growth, while net sales growth was driven by our pricing strategy and premiumisation, especially in the US. This drove gross margin expansion, which together with our continued focus on operating efficiencies, delivered operating margin improvement.”

He adds: “This is a strong set of results, confirming our medium term guidance and supporting our decision to increase the interim dividend by 9%.”