We were hit by austerity drive:
Diageo CEO;Ivan Menezes, CEO of Diageo, says the austerity
drive in China hit the company;s high-end products, but adds
that consumer momentum is returning in the world's
second-largest economy.</p>
Global drinks brand Diageo
posted disappointing sales for the first half on Thursday, after a
slump in Asia Pacific, but the CEO insisted that the business was
"solid" in developed markets.
The world's biggest spirit maker, which owns brands such as Johnnie Walker, Captain Morgan, Baileys and Guinness, reported that net sales fell 1 percent to £5.9 billion ($8.9 billion) in the six months to December 31 – the company's fiscal first half. Analysts polled by Reuters had expected revenue of £6 billion.
Sales slipped 4 percent in Europe and a slowdown in
emerging markets saw sales tank 39 percent in the Asia Pacific region.
But Ivan Menezes, chief executive officer of Diageo, told CNBC Europe's "Squawk Box" that the results were "solid" and showed that the business had momentum.
The world's biggest spirit maker, which owns brands such as Johnnie Walker, Captain Morgan, Baileys and Guinness, reported that net sales fell 1 percent to £5.9 billion ($8.9 billion) in the six months to December 31 – the company's fiscal first half. Analysts polled by Reuters had expected revenue of £6 billion.
Sales slipped 4 percent in Europe and a slowdown in
emerging markets saw sales tank 39 percent in the Asia Pacific region.
But Ivan Menezes, chief executive officer of Diageo, told CNBC Europe's "Squawk Box" that the results were "solid" and showed that the business had momentum.
"Our second quarter was stronger than our first quarter, but the world is choppy out there in the emerging markets in places like Nigeria, Venezuela and Russia. However our business is solid in the developed world," he said.
Menezes added that business had improved in two-thirds of emerging markets and was also doing well in established markets like the U.S. Sales in the U.S. were down 1 percent, but rose 38 percent in Africa.
He also said he was confident that momentum in China – dented by a government clampdown on ostentatious wealth and official gift giving -- would return. In mainland China, scotch sales were down 22 percent, Diageo said.
Menezes added that business had improved in two-thirds of emerging markets and was also doing well in established markets like the U.S. Sales in the U.S. were down 1 percent, but rose 38 percent in Africa.
He also said he was confident that momentum in China – dented by a government clampdown on ostentatious wealth and official gift giving -- would return. In mainland China, scotch sales were down 22 percent, Diageo said.
"What you saw in our business and other spirit players was a correction that happened through the austerity drive over the past couple of years, but we're coming through that and we will be back in good growth."
The company raised its interim dividend to 21.5 pence per share, up 9 percent from the same period a year ago. Earnings per share before exceptional items were 53.7 pence.
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