By Andy Young

Diageo has reported a return to sales growth, but the drinks giant's profits have once again been hit by exchange rate volatility. 

In the 12 months to June 30, 2016, the company's like-for-like sales were up 2.8 per cent on the previous year. That increase reverses a two-year trend where growth has been largely flat. However the company's reported sales were down three per cent to $10.5bn and pre-tax profit fell by 2.6 per cent to $2.86bn. 

Ivan Menezes, chief executive of Diageo, said: "This is a good set of results delivering what we set out to achieve this time last year and demonstrating our momentum.

"This better performance reflects the work we have done to strengthen our big brands through marketing and innovation, as well as expanding our distribution reach. Our six global brands and our US spirits business are all back in growth and we have seen a significant improvement in the performance of our scotch and beer portfolios. The delivery of volume growth; organic margin expansion; increased free cash flow; and the disposal of £1bn in non-core assets, comes from an everyday focus on efficiency in each aspect of our business. We have also made significant progress this year in our aim to improve the role of alcohol in society, partner with our communities and reduce our environmental impact.

"These results position us well to deliver a stronger performance in F17. We are confident of achieving our objective of mid-single digit top line growth, and in the three years ending F19 delivering 100bps of organic operating margin improvement."

In Australia the company reported net sales increase of two per cent with growth in Scotch, vodka, liqueurs and gin "offsetting the decline in the ready-to-drink business".

In addition the company reported: "In rum, strong growth of Captain Morgan both in ready to drink and spirits categories, offset the decline in Bundaberg. Reserve brands were up 7% largely driven by Johnnie Walker, as consumers continue to premiumise within the spirits category."

Diageo also reported growth in the US at three per cent, with Smirnoff and Captain Morgan performing well, while emerging markets once again proved a problem area with sales in Nigeria and Brazil down 15 per cent and nine per cent respectively.

The company also commented on the impact of the recent Brexit vote in the UK saying: "Following the UK’s vote to leave the EU, Diageo is working closely with government and industry bodies to ensure its views are reflected in the transition process. Diageo welcomes the formation of a specialist international trade department, as it is important for Diageo that the UK continues to benefit from open access to the EU as well as favourable international trade agreements."

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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