World: Diageo’s organic net sales up 4% in its 2016/17 financial year

Diageo, the world’s largest spirits producer, saw its organic net sales grow by 4% to reach £12.1 billion (US$15.8 bln) in its 2016/17 financial year, with growth across all key regions.

Organic operating profit rose 5.6% to £3.6 billion, driven by “good progress” on the Johnnie Walker maker’s productivity plan. Diageo has now raised its productivity goal to £700 mln, two thirds of which will be reinvested 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 Ivan Menezes, group CEO.

“Our productivity work is delivering ahead of expectations allowing us to reinvest in our brands, drive margin improvement and generate consistent strong cash flow.

“Through productivity we have embedded an everyday efficiency mind set in the business and with improved data and insight we are making faster, smarter decisions on investment choices.”

Following the “strong” year, Diageo’s board has approved a share buy-back programme of up to £1.5 billion in FY18.

In reported terms Diageo’s net sales and operating profit increased 15% and 25% respectively off the back of favourable exchange rates for the US dollar and the euro compared to the pound sterling.

Diageo also confirmed that its acquisition of George Clooney’s Casamigos Tequila brand is set for completion in the second half of 2017, subject to regulatory clearences.

The group agreed to pay US$700 mln for the brand last month, as well as an additional US$300 mln over 10 years depending on its performance.

All of Diageo’s spirit categories experienced organic growth in FY17, except vodka, which declined 4% due to a “soft performance in all regions except Africa”. Both Smirnoff and Ciroc continued to struggle and saw organic declines of 1% and 12% respectively.

Baijiu brand Shui Jing Fang experienced the greatest organic growth – 65% – while Don Julio Tequila and Bulleit Bourbon also saw strong double-digit gains.

This is the first set of full-year financial results announced by Diageo under the stewardship of new chairman Javier Ferrán, who joined the company in January this year.

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