DIAGEO has described the performance of its Scotch whisky business as “strong and sustainable” and said it would take Brexit in its stride, with a hope that the UK can extend global free-trade agreements.
As it announced a £1.5 billion share buy-back, to be delivered in 2018, the drinks giant reported a 25 per cent surge in pre-tax profits to £3.6bn, with net sales up 15 per cent to £12.1bn.
Diageo is the biggest player in the global Scotch whisky industry. Scotch represents a quarter of its total net sales and was up five per cent in the period, with broad-based growth across all regions.
Its flagship brand, Johnnie Walker was up six per cent, while Buchanan’s and Black & White both saw 16 per cent sales growth. Scotch reserve brands, which include many of the group’s single malts, grew net sales four per cent driven by Johnnie Walker Gold Label Reserve and The Singleton.
Exchange rate gains helped boost operating profits by £80m.
European sales were up five per cent, with North American and Asia Pacific both up three per cent. China being a primary driver of the latter. Africa (five per cent) and Latin America and the Caribbean (nine per cent) also saw growth.
The group raised its productivity goal to £700 million and committed to reinvesting two-thirds of that into the business.
“We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas of US spirits, Scotch and India,” said chief executive Ivan Menezes. “Diageo is a strong company today and we are confident in our ability to deliver sustainable growth."
Diageo’s president for Europe, Russia, Turkey and India, John Kennedy, reiterated that job losses in Scotland earlier this year were not related
to Brexit, but came after a review of the group’s supply footprint. The GMB union had claimed that the 105 job losses which came
after Diageo moved some vodka production out of Scotland, was because it was “hedging its bets” over Brexit.
Mr Kennedy said: “The [job losses are] not related to Brexit, they’re related to the structure of our business,” he said, adding that Diageo felt it could “take Brexit in our stride”.
Last year, the disposal of Diageo’s wine business led to a reduction in work at its Italian manufacturing facility. Mr Kennedy said as a consequence of that it had reviewed all its European packaging operations.
“There are expected job losses due to that, but we are committed to the three packaging facilities we have in Europe, at Leven, Shieldhall and in Italy.”
On the UK’s pursuit of trade deals post-Brexit, Mr Kennedy said: “What we feel strongly about, and we’re advocating for this, is that expanding free trade is a good thing for Scotch. It’s a £4bn industry and 90 per cent of it is exported abroad. Doing things like ensuring we don’t lose free trade agreements, but expanding those, is important.”
Mr Kennedy said investors would see a continued focus on driving the group’s major brands.
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