DGE Diageo Plc

   By Saabira Chaudhuri 
 

LONDON--Diageo PLC (DGE.LN) on Thursday reported higher earnings for the year on the back of stronger sales in Scotch and beer, and said it would return more capital to shareholders.

The maker of Johnnie Walker whisky, Guinness beer and Smirnoff vodka reported a profit of 3.02 billion pounds ($3.97 billion) for the year ended June 30 compared with GBP2.72 billion a year earlier, on net sales that edged up 0.9% to GBP12.16 billion.

Under Chief Executive Ivan Menezes, Diageo has made strides toward turning around its performance in North America, its largest and most profitable market, cutting costs and refining how it allocates marketing spend. The company is currently shopping a slew of U.S. brands, including Canadian whisky Seagram's VO and cinnamon schnapps Goldschlager.

According to executives, millennials are drinking less alcohol but spending more money on each drink, and Diageo--like other drinks companies--has been trying to play to this trend.

In the U.S., the company's largest and most profitable market, Diageo has focused on getting drinkers to trade up to high-end variants of brands like Tanqueray gin and Johnnie Walker whisky. It is also trying to buoy its vodka sales, which have flagged in the face of competition from Fifth Generation Inc.-owned Tito's Handmade vodka.

On Thursday, Diageo said net sales in its U.S. spirits business on an organic basis grew 3%, buoyed by Scotch and tequila. But this contrasted beer's performance, which declined 2% in the U.S., while vodka continued to be a weak spot as sales dropped 3% for North America.

Alongside sales, the London-based liquor giant announced a new share buyback of up to GBP2 billion for fiscal 2019.

In India--another key Diageo market--the company reported that organic sales jumped 9% as it benefited from an easy comparable from a year earlier where sales were hit by a ban on the sale of liquor near highways.

Volumes rose 1% organically but tumbled 9% on a reported basis, which Diageo attributed to its move to franchise brands in some states. The company has franchised mass-market brands for a fixed fee in states like Kerala where the sale of alcohol is heavily restricted, instead focusing on selling pricier tipples.

"Diageo has reported a solid set of full-year results in terms of both quality and quantity," said RBC analyst James Edwardes Jones.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

July 26, 2018 04:16 ET (08:16 GMT)

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