Guinness brewer Diageo beat forecasts with a big sales rebound in the first three months of 2010 today led by strong emerging market growth.
The London-based drinks company, which also makes of Smirnoff vodka and Captain Morgan rum, said it had seen signs of fragile recovery in its mature markets such as North America and a stronger one in its emerging markets of Latin America, Africa and Asia.
The drinks maker reported its third-quarter [from January to March] underlying sales grew 12 per cent compared with a consensus forecast of 6.5 per cent by analysts and rival Pernod Ricard's 16 per cent growth.
Diageo stuck to its full-year target to see a low single digit percentage rise in operating profits, which after a 3 per cent fall in the first-half to end-December 2009 will need a rebound in its January-June 2010 second-half to meet the target.
Analysts said the shares were expected to start higher after beating expectations and reaffirming its annual profit target.
"With this double-digit sales result it appears that Diageo is well on its way to meeting its low-single-digit organic guidance target for the year," said analyst Anthony Bucalo at brokers Credit Suisse.
"While we have seen some signs of recovery, albeit fragile in the mature markets and stronger in the emerging markets, our performance in the quarter benefited from comparison against a weak third quarter last year, from the earlier Easter this year and in some markets sales were brought forward in advance of excise duty increases," said chief executive Paul Walsh in the third-quarter trading statement.
Diageo and Pernod have suffered from the global downturn and big destocking in the United States in early 2009 which followed the collapse of Lehman Brothers in late 2008, but both are now looking to benefit from the first signs of recovery.
Last week, Paris-based Pernod reported its rebound in sales and upgraded its target to look for a 3 per cent growth in profit for its year to end-June helped by signs of recovery in all areas around the world apart from western Europe.
The French group, which markets Absolut vodka and Chivas Regal whisky, makes around 20 per cent of its profits from Asia compared to Diageo's 8 per cent, giving it an advantage while Asia is leading the industry's emerging markets recovery.
Reuters