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Asia Pacific slip hits Diageo sales

Diageo,the world's biggest liquor group,blamed a postponed duty free shipment for fall.

Written by Agencies | London | Published: October 17, 2012 9:23:24 pm

Diageo,the world’s biggest liquor group,said a postponed duty free shipment heading for global travelers and a weak South Korean market hampered quarterly trading in its Asia Pacific region.

Diageo,which makes around 14 percent of group net sales in Asia Pacific,said on Wednesday sales in the region rose 2 percent in the three months to September,helped by demand for scotch in China.

That was well below analysts’ consensus forecast of an 8 percent rise.

The delayed arrival of the duty free shipment to the region,which came in the next quarter,was likely to have knocked 2 to 3 percentage points off growth,Shore Capital analyst Phil Carroll said,adding that this would come back in the next few months.

Asia Pacific was disappointing and South Korea and Japan are markets we will be keeping a close eye on in future but if you are looking at the picture as a whole we are still very happy. It remains our key pick in the sector,Carroll said.

The Britain-based firm reported a 5 percent rise in underlying group sales for its financial first quarter,in line with analysts’ forecasts – as demand for brands including Smirnoff vodka and Captain Morgan rum in the United States and across emerging markets drove business.

That was a slowdown from the 9 percent sales growth a year earlier.

Diageo shares were down 0.9 percent at 1258 GMT.

Underlying quarterly sales in North America,which accounts for around a third of group sales,grew by 6 percent as appetite for premium spirits increases in the region. Sales rose by 16 percent in its Latin America and Caribbean region and 11 percent in Africa,both ahead of forecasts.

European sales fell by 1 percent as double-digit percentage growth in sales across Turkey,Russia and Eastern Europe was dragged down by weak trading in western and southern regions,with consumer demand in France hit by duty increases.

Underlying sales exclude the impact of acquisitions. Volume rose by 2 percent in the period.

The maker of Johnnie Walker whisky,Guinness beer and Tanqueray gin expects half its turnover to come from fast-growing Asian,African and Latin American markets by 2015 compared with nearly 40 percent in its last financial year.

Diageo is in talks to acquire a stake in Indian billionaire Vijay Mallya’s United Spirits Ltd,reviving an on-off courtship that would increase its presence in the world’s largest whisky market.

The group,which has long coveted an expanded presence in India,is looking initially to buy a 15 percent stake from Mallya’s UB Group,which owns about 28 percent of United Spirits,and a further 10 percent from other shareholders,one banker familiar with the matter told Reuters last month.

As part of its growth strategy,Diageo is also believed to be eyeing the acquisition of a minority stake in Mexican tequila maker Jose Cuervo from its owners,the Beckmann family.

Diageo’s arch rival and world No.2 spirits group Pernod Ricard reports on its first quarter on Oct. 25.

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