Americas Help Europe’s Drinks Makers Offset Europe And Asia

SABMiller Restores Volume Growth Amid Improvement in Europe

Investec analyst Martin Deboo said the results for Diageo, were maker of Johnnie Walker whisky and Smirnoff vodka, fitted his sell thesis – “that emerging markets are set to make life difficult for Diageo for a while”. Both Diageo and France’s Remy Cointreau (RCOP.PA) cited a Chinese government crackdown on gift-giving as a drag on sales there. Remy, which generates about 40 percent of its operating profit from cognac sales in China, said wholesalers were reducing inventories after sales fell short of expectations during the Chinese New Year. The maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum said revenue declined 5.3 percent on a like-for-like basis to 294.4 million euros (247 million pounds) in the three months to September 30, its second quarter, compared with a 2.3 percent decline in the previous quarter. Sales of Remy Martin cognac fell 8.3 percent like-for-like, compared with a 12.9 percent slump in the first quarter, and the firm said China would continue to weigh on sales in the coming months. A recent weakening of various currencies against the U.S. dollar has also hit results. Diageo, which made a net profit of 2.59 billion pounds in the year to June 30, said that, based on spot rates, foreign exchange factors would reduce 2014 operating profit by 165 million pounds. Meanwhile brewer SABMiller Plc (SAB.L), maker of Peroni and Grolsch beers, reported net revenue rose 6 percent in its second quarter, after a 2 percent rise in the first. Sales rose 4 percent in Latin America, 3 percent in North America, 12 percent in Africa, and 5 percent in Asia Pacific, but were flat in Europe. “We see this as a solid result in tough market conditions,” said Numis Securities analyst Wyn Ellis. At 10:27 a.m., Diageo shares were up 0.7 percent in London, where SABMiller shares were up 4.2 percent.

The brewer said it expects the consumer climates in both Europe and North America to remain under pressure. SABMiller said it achieved a strong performance in Africa, where volume rose 9 percent in the first half, and good progress in Latin America , South Africa and the Asia-Pacific region. The brewer gets the largest proportion of sales from emerging markets compared with its main rivals, helping compensate for declining beer sales in Europe and the U.S. Diageo Misses Volume rose 1 percent in Latin America, SABMillers largest region, in line with estimates. Civil unrest weighed on improvements in Colombia , though sales in Peru returned to growth in the second quarter after tax increases. Diageo said today that it saw headwinds in some faster-growing economies and missed analysts estimates for sales in both Asia and the Africa, Eastern Europe and Turkey region. Emerging-market growth is decelerating — fast — driven by a mix of weak demand and destocking, Deboo wrote. Diageos total organic revenue in the three months ended Sept. 30 rose 3 percent, trailing the 4 percent median estimate of 13 analysts in a Bloomberg News survey. A 1.1 percent sales decline in western Europe beat the median estimate for a 3 percent drop, while North American growth of 5.1 percent exceeded the 4.5 percent median estimate. The distiller said it still expects net sales in Europe to show a low single-digit decline for the full year.