Diageo, Pernod beat forecasts with emerging boost

By @ibtimes on

The world's biggest spirits makers Diageo and Pernod Ricard beat forecasts on Thursday with strong sales growth in the first three months of 2011 as buoyant emerging market growth offset a weak Europe.

Both gained from growth in Asia, Latin America and Africa and gradual recovery in North America which helped to offset weakness in Europe, hit hard by tough economic conditions in Greece, Ireland and Spain.

The figures mark a continued improvement in trade, which picked up in 2010 after suffering throughout most of 2009 when the global downturn prompted consumers to move to cheaper drinks and wholesalers to use up stocks rather than make new orders.

World No. 1 spirits group Diageo, the maker of Smirnoff vodka and Johnnie Walker whisky, reported its third quarter January-March underlying sales rose 7 percent, beating a 1.8 percent consensus in a Reuters poll of 10 analysts.

French rival and world No 2 Pernod, which makes Absolut vodka and Martell cognac, reported quarterly underlying sales up 5 percent, well ahead of the 2.5 percent predicted in a poll of 12 analysts.

Both reaffirmed their targets for the current year. Diageo said it was looking to beat last year's operating profit rise of 2 percent for the year to end-June 2011 and Pernod said it was aiming for an annual profit rise close to 7 percent.

Diageo Chief Executive Paul Walsh said although trading in Europe was challenging, North American consumer trends were improving and its emerging markets were driven by the strength of its scotch whiskies especially around the Chinese New Year.

We remain confident that our ... marketing investment together with the increased investment we have made in emerging markets in the year will continue to deliver improved performance, he said in a trading update.

Pernod Chief Executive Pierre Pringuet said the group recorded strong sales growth of 15 percent in emerging markets and saw flat sales in mature markets during the quarter.

The third quarter 2010/11 confirmed the improved business trends since the start of the financial year and strengthens our confidence in our ability to meet our targets, he said.

Shares in both companies have risen around 10 percent from mid-March lows on hopes of continued recovery and emerging market growth. Pernod shares are trading on 14.5 times forecast 2011/12 earnings. Diageo is slightly behind on a 14.2 multiple.

Diageo shares closed on Wednesday at 12.12 pounds and Pernod at 66.98 euros.

(Reporting by David Jones; Editing by Sophie Walker)

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