Diageo reports stronger first-half profit as it gains in Europe

First-half profit at drinks group Diageo beat analysts' estimates as the world's largest distiller posted better-than-expected sales and gained market share in Europe.

Earnings before interest and tax rose 2 per cent on a so- called organic basis in the six months ended December 31st, Diageo said. The median estimate of 21 analysts surveyed by Bloomberg was for growth of 1.5 per cent.

European sales rose 2 per cent, better than the 1 per cent expected by analysts, boosted by so-called reserve brands such as Johnnie Walker and Ciroc vodka.

Globally, Guinness net sales increased 9 per cent, while in the Republic of Ireland net sales were up 5 per cent. Guinness grew 2.1 per cent in volume in the Republic.

In the Republic, Baileys grew 0.9 per cent in volume, while globally Baileys net sales increased by 6 per cent driven by growth in Great Britain and the United States.

Diageo said Ireland is experiencing an increase in interest in the Gin category from consumers. Gordon’s gin grew 9.5 per cent in volume in the Republic.

"For the full year we expect volume growth to drive stronger top line performance, margin to slightly improve and strong cash conversion to continue," chief executive Ivan Menezes said.

The rebound in Europe, where sales had been sluggish, is welcome as Diageo had been relying on emerging markets such as Africa, which should account for 20 per cent of Diageo’s sales by 2020, Mr Menezes has said. Last year it dissolved an African joint venture with Dutch brewer Heineken NV there so the distiller could have more control over its operations.

Diageo’s first-half organic sales rose 1.8 per cent, compared with analysts’ estimates for growth of 1.6 per cent. That was an improvement from the first-quarter’s 1.5 per cent decline.