) reported its preliminary results for the year ended 30 June 2012,
wherein fiscal 2012 earnings went up 13% from the year-ago period
to $1.26 (94.2 pence). The upswing in profit was the result of
strong global organic growth and improved performance of strategic
brands like Johnnie Walker and Ciroc.
The company recorded net revenue (i.e. total revenue minus
excise duties) growth of 6% in the year. Volume grew 2% year over
Gross profit for fiscal 2012 climbed 10.2% year over year on the
back of higher net sales. Operating profit increased 9.0% from the
year-ago level despite an 8% hike in marketing spend due to
controlled promotional expenses. Operating margin inflated 60 basis
points driven by positive pricing mix shift to premium
, Diageo's net sales went up 6% on an organic basis. Volume went up
2% in fiscal 2012. Spirits' net sales went up year over year on the
back of strong performance of the Ciroc brand, which in turn was
driven by new product launches like Ciroc Peach. However, Wine
reported a year over decline in net sales due to intense pricing
pressure U.S. The segment operating profit went up 6% in fiscal
, net sales declined 1% on an organic basis. Volume also went down
1% from the year-ago level due to the challenging economic
conditions in Southern Europe. However, the company performed
better in the emerging markets of Eastern Europe like Russia and
Turkey. Scotch sales remained strong during the year with Smirnoff
and Captain Morgan performing well in Great Britain. The segment
operating profit went up 3% in fiscal 2012 on the back of the
company's new restructuring program started in fiscal 2011. Under
this program, Diageo reviewed its operating model in Scotland and
Ireland with an objective to improve the effectiveness and
productivity of the group's operations and deploy resources closer
to the market.
net sales increased 11% on an organic basis backed by double-digit
growth in East Africa, Ghana and Cameroon. Volume went up 5% in
fiscal 2012. Beer and Spirits did well, backed by investment in
brands like Guinness, Tusker and Johnnie Walker and innovations
like Harp Lime in Nigeria. The company further strengthened its
presence in Africa with the acquisition of Meta Abo Brewery in
Ethiopia. The segment's operating profit went up 20% in fiscal
Latin America and the Caribbean
, net sales went up 19% on an organic basis driven by strong
businesses in Paraguay, Uruguay and Brazil. Volume went up 10%.
Scotch boosted net sales in the region backed by strong performance
of brands like Johnnie Walker and Old Parr. Operating profit went
up 22% in fiscal 2012 due to the positive price mix in the
, net revenue went up 8% on an organic basis with strong
performance in South East Asia, Greater China and India. Scotch
drove growth in the region backed by the company's deluxe as well
as reserve brands like Zacapa, Ketel One vodka and Ciroc. Volume
rose 2% in fiscal 2012. Operating profit went up 18% in fiscal
For fiscal 2013, the company expects input cost inflation to
average around 4%. The company is concerned that Western Europe
might witness further weakness during the period.
Based in London, United Kingdom, Diageo is involved in
producing, distilling, brewing, bottling, packaging and
distributing spirits, wine and beer.
Currently, we have a long-term Neutral recommendation on Diageo,
which carries a Zacks #3 Rank (short-term Hold rating).
DIAGEO PLC-ADR (DEO): Free Stock Analysis
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