Thursday, September 24, 2015

Diageo provides foreign exchange losses

Diageo, the world's largest manufacturer of distillates, informed yesterday that you should have a better sales growth this year, compared to last year, but the con about operational profits represented by the weaker currencies will be larger than expected, of 150 million pounds (about US $ 230 million).
In a trade balance released yesterday before the Group's annual meeting in London, the Chief Executive Ivan Markovic reiterated that sales in the United States fell 2 percent in the first half compared to the same period last year.
North America is the single largest market and accounts for a third of sales and 47% of operating profits. But the u.s. come in for underperformed in recent years, in part because the Group has been slow in reaction to changing consumer preferences and inefficiencies in the way it distributes its distillates, which include Johnny Walker Scotch and Smirnoff vodka.
Diageo expects a recovery in the us with the appointment of Deirdre Mahlan, President of the Group's operations in the country, replacing Larry Schwartz, who must retire at the end of the year.
Menezes said that the Group's fiscal year-started on July 1st-started well and was within expectations. However, although the demand for more expensive brands is increasing in emerging markets, the weakening of the currencies of these countries will affect the operating profit to 150 million pounds. Analysts had predicted earlier a foreign exchange impact of 100 million pounds.
James Edwards Jones, an analyst at RBC Capital Markets, said the statement issued yesterday by the company was ambiguous: "the news about the volumes is positive, but that the exchange rate will impact profits before interest and taxes in 150 million pounds in the year, doesn't help, although it has not surprised. This represents a deterioration, although not a large size. "
Diageo, which also controls the Guinness, is regarded by some analysts as a possible merger partner for SABMiller, the second largest brewer in the world, for which Anheuser-Busch InBev is preparing a proposal for purchase. However, Menezes made clear his preference for remaining a company based largely in the production of distillates.
Philip Gorham, senior analyst for Morningstar's stock, said yesterday that Diageo is a company with a lower performance which could be arrested if activists investors cannot reduce your costs-in addition to the 200 million pounds that are already being cut.
"The action has retreated in recent months, following a perfect storm: acquisitions that have failed to create value, a possible investigation by the Securities and Exchange Commission, adverse currency impacts and several years of lower performance in terms of volume," he said.
"Without a solid run over the next 6 to 12 months, however, we believe that Diageo could become increasingly subjected to scrutiny of activists investors, who may try to sell assets considered non-essential."
The company, which accumulated a devaluation of 6% since the beginning of the year, were stable yesterday.
Valor Economico
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