Americas help Europe's drinks makers offset Europe and Asia

Reuters

By Martinne Geller

LONDON (Reuters) - Strong sales of alcohol in the Americas have helped European drinks firms to offset sluggish or non-existent growth in Europe and Asia.

Diageo Plc (LSE:DGE), the world's biggest spirits company, reported a 3.1 percent rise in sales for its first quarter, ended on September 30.

While sales rose 10.9 percent in Latin America and the Caribbean, 5.1 percent in North America, they grew only 1.3 percent in Africa, Eastern Europe and Turkey and 0.6 percent in Asia Pacific - markets whose growth drinks firms have been relying on as austerity-hit Western Europe struggles. Sales in Western Europe fell 1.1 percent.

Several analysts said Diageo's results were below consensus expectations for an overall sales rise of 4 percent.

Investec analyst Martin Deboo said the results for Diageo, were maker of Johnnie Walker whisky and Smirnoff vodka, fitted his sell thesis - "that emerging markets are set to make life difficult for Diageo for a while".

Both Diageo and France's Remy Cointreau (PAR:RCO) cited a Chinese government crackdown on gift-giving as a drag on sales there.

Remy, which generates about 40 percent of its operating profit from cognac sales in China, said wholesalers were reducing inventories after sales fell short of expectations during the Chinese New Year.

The maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum said revenue declined 5.3 percent on a like-for-like basis to 294.4 million euros (247 million pounds) in the three months to September 30, its second quarter, compared with a 2.3 percent decline in the previous quarter.

Sales of Remy Martin cognac fell 8.3 percent like-for-like, compared with a 12.9 percent slump in the first quarter, and the firm said China would continue to weigh on sales in the coming months.

A recent weakening of various currencies against the U.S. dollar has also hit results. Diageo, which made a net profit of 2.59 billion pounds in the year to June 30, said that, based on spot rates, foreign exchange factors would reduce 2014 operating profit by 165 million pounds.

Meanwhile brewer SABMiller Plc (LSE:SAB), maker of Peroni and Grolsch beers, reported net revenue rose 6 percent in its second quarter, after a 2 percent rise in the first.

Sales rose 4 percent in Latin America, 3 percent in North America, 12 percent in Africa, and 5 percent in Asia Pacific, but were flat in Europe.

"We see this as a solid result in tough market conditions," said Numis Securities analyst Wyn Ellis.

At 10:27 a.m., Diageo shares were up 0.7 percent in London, where SABMiller shares were up 4.2 percent. Remy shares were down 4.1 percent in Paris.

(Additional reporting by James Regan in Paris; Editing by Kevin Liffey)

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