LONDON (dpa-AFX) - British beverages company Diageo Plc (DEO, DGE.L) reported Thursday a higher pre-tax profit in its first half of fiscal 2012 thanks to higher spirits and beer volume. Net profit declined due to higher tax expenses. The company also announced a 7% increase in dividend and said it is cautious as to the consumer and economic trends it will face in 2012.
For the first-half, pre-tax profit increased to 1.86 billion pounds from last year's 1.61 billion pounds. Due to higher taxation, profit attributable to equity shareholders of the parent company declined 20 percent to 953 million pounds or 38.1 pence per share from 1.19 billion pounds or 47.8 pence per share in the year-ago period.
Earnings per share, before certain exceptional items, grew 16 percent to 55.9 pence.
Net sales for the six-month period improved 8 percent to 5.76 billion pounds from 5.32 billion pounds a year ago. On an organic basis, revenues increased 3 percent.
Volume was 84.1 million, 6 percent higher than last year's 79 million helped by improved performance by spirits and beer, despite a decline in ready to drink volume and flat wine sales.
The company noted that a 4 percentage points of price/mix drove organic gross margin improvement of 70 basis points.
Operating profit grew 7 percent to 1.84 billion pounds, and adjusted operating profit went up 10 percent.
Diageo Chief Executive Paul Walsh said, 'Diageo has delivered a solid and well balanced first half performance with 9 percent operating profit growth and 60 basis points of operating margin expansion. In an uncertain economic environment we have again demonstrated the benefits of our geographic diversity and brand range.'
On a geographical basis, North American sales grew 3 percent and sales in Europe increased 9 percent. 'The economic environment, particularly in Southern Europe, has impacted our performance in Western Europe, while in the emerging markets of Europe we have delivered strong growth,' the company said.
Emerging market business grew net sales by 18 percent and now accounts for almost 40 percent of business. The performance improved in developed markets business.
The company's strategic brands' sales grew 8 percent and the strongest performing categories were scotch and vodka, while beer brands delivered 7 percent organic net sales growth.
Further, Diageo announced a 7 percent increase in interim dividend to 16.60 pence per share that 'signals our confidence that we are making a strong business stronger,' the company noted.
Looking ahead, the company said the first half results have positioned it well and they have demonstrated that it has the brands, the routes to market and the people to deliver its medium term guidance.
Diageo shares are currently trading at 1,453.06 pence, down 8.44 pence or 0.58 percent in London.
Copyright RTT News/dpa-AFX
