City spirits sink after Diageo comes up short with sales slide
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Version 0 of 1. Hopes of a sales rebound at Diageo at the start of this year have fallen flat as the drinks giant reported an unexpected slowdown in quarterly revenues, sending its shares down nearly 4 per cent to 1,896.5p. The results contrasted with those of two other consumer giants, Unilever and SABMiller, which showed recovery in key markets. Sales at Diageo fell faster in the three months to the end of March than in the second half of 2014. Organic net sales were down 0.7 per cent; analysts had been looking for a 2 per cent increase. The Johnnie Walker to Guinness maker has been restructuring its business and encouraging its trade customers to destock, so that it can adapt better to changing consumer trends. But industry watchers had expected demand to bounce back, particularly in North America, which makes up 40 per cent of Diageo’s total sales. In continental Europe sales were broadly flat, and in the UK sales dropped sharply, due to unfavourable comparisons with last year when the drinks trade was stocking up ahead of an anticipated hike in duty on spirits. Ivan Menezes, the chief executive of Diageo, said he expected sales growth to remain subdued this year, due to weakness in international economies, lower inflation and the company’s efforts to strengthen its business. Meanwhile, the household goods giant Unilever and the brewer SABMiller issued more positive trading statements than had been expected, sending their shares higher. Unilever declared a good first quarter, posting sales growth of 2.8 per cent as emerging markets including China unexpectedly bounced back with sales up 5.4 per cent. Paul Polman, its chief executive, had warned the market not to expect good growth this year. But he said the company was now seeing “more tailwinds than headwinds”. Unilever shares were 77p higher at 3,011p. The company, which launched new pink-and-black Magnum ice-creams in the UK this week, said it was also launching a cut-price smaller Cornetto across Europe that will sell for €1. Unilever said that conditions in European markets remained weak, but that there had been improvement in India, more stable conditions in China and a deterioration in Brazil and Russia, where consumer incomes are being squeezed. SABMiller posted underlying growth in revenues of 6 per cent in its fourth quarter, as it provided an update on trading for the year to the end of March. Good weather in the UK helped sales of Peroni lager climb by 4 per cent, and its shares increased by 51p to 3,636p. The world’s second-largest brewer, which also makes Grolsch and Pilsner Urquell beer, pointed to improvements in its businesses in Asia, Latin America and Africa, where sales growth reached 12 per cent. Lager sales in Europe were hit by the continuing crisis in Ukraine and uncertainties over market conditions in Russia, the company said. Sales in the US were lower, compared with numbers last year, when the brewer launched its Miller Fortune brew. |