) earnings in the first half of fiscal 2013 went up 9% y/y to
60.9 pence (97 cents* per share) from 55.9 pence (89 cents** per
share) in the same period in the previous year.
The increase in profit was the result of strong organic growth
of Diageo's strategic brands. Increasing reach to the burgeoning
middle class coupled with fast penetration of the company into
emerging markets contributed to the positive results.
On a reported basis, net revenue (i.e. total revenue minus
excise duties) increased 5% to £6.0 billion ($9.6 billion) in the
first half of fiscal year 2013 ending December 31, 2012. On an
organic basis also, revenues increased 5%, while volume grew 1%
Diageo increased its marketing spending by 5% organically in
the first half of fiscal 2013. Operating profit before
exceptional items (excluding acquisitions and disposals) went up
9% year over year, on an organic basis.
Except Europe, all the regions have delivered positive organic
, Diageo's organic sales increased 5% in the first half of fiscal
2013, with a volume growth of 1%. Price/mix contributed 4
percentage points to organic sales growth. Marketing spending
increased 5% in the region, primarily because of the launch of
Smirnoff Iced Cake and Kissed Caramel and Ketel One vodka.
Operating profit grew 9% organically in the year.
Among the spirits, Cîroc showed strong performance in the
first half of the year.. The lack of innovation in beers impacted
performance in the first half.
, organic sales fell 2% along with volume declines of 3%. The
company, saw 3% decline in operating profit despite a 2% decline
in marketing spending.
The economy in Southern Europe remains challenging. While
Diageo's performance in Great Britain remained unchanged, Germany
and Benelux performed well during the period. Johnnie Walker's
ultra premium brand performed well in the region.
, organic sales increased 10% in the first half, with a volume
growth of 3%. Marketing spending increased 7% in the region,
particularly behind core beer brands and international spirits.
However, operating profit increased 17%.
Latin America and Caribbean
region delivered a strong performance in the year, with organic
sales growth of 18% and volume growth of 7%. The company also
increased its marketing spending by 22% to enhance the brand
equities in scotch, increase the significance of vodka and
support innovation. Despite the increasing costs, operating
profit grew 23% in the first half.
region, sales increased 6% organically with a volume growth of
1%. Marketing spending jumped 3% and operating profit grew 10%,
on an organic basis. However, uncertainty around the global
economy led to further contraction of the whisky market in
The company is increasing marketing investment in all the
geographical segments, and is focusing more on its premium
brands. The strategy of transitioning to high margin high priced
products is helping the company improve its margins.
Currently, Diageo Plc carries a Zacks Rank #3 (Hold). We would
also recommend that investors to consider
Boston Beer Company Inc.
Compania Cervecerias Unidas S.A.
) that carry a Zacks Rank #1 (Strong Buy) and
Constellation Brands Inc.
) with a Zacks #2 (Buy). These companies offer a more attractive
exposure to alcoholic beverage segments.
*£1=$1.59292 (average price of the year ended December 31,
**£1=$1.59244 (average price of the year ended June 30,
CERV UNIDAS-ADR (CCU): Free Stock Analysis
DIAGEO PLC-ADR (DEO): Free Stock Analysis
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