July 25, 2019 / 6:18 AM / 4 months ago

Game of Thrones inspired scotch boosts Diageo's sales

(Reuters) - Diageo, the world’s largest spirits company, reported higher annual profit on Thursday, helped by growth across all its markets and the popularity of its “Game of Thrones” inspired scotch.

The company also approved plans to return up to 4.5 billion pounds ($5.6 billion) to shareholders over financial years 2020-2022, less than some analysts had expected, which pushed its shares 1.8% lower.

Diageo reported pre-exceptional earnings per share of 130.8 pence, beating company supplied estimates of 128.8 pence, saying results were also helped by an improved price mix and cost controls.

Diageo has been restructuring in recent years to improve performance and streamline its portfolio, while trying to bulk up on newer, hipper brands. It has looked to focus on its scotch business and grow its operations in India and the United States.

The maker of Johnnie Walker scotch whisky, Smirnoff vodka and Guinness stout said operating profit rose 10% to 4 billion pounds ($5 billion) for the year ended June 30.

Asia Pacific sales rose 9% on strong demand in China and India. Net sales in North America rose 5%, with total net sales up 5.8% at 12.9 billion pounds.

“WHITE WALKER” WINS CONVERTS

Scotch represents a quarter of Diageo’s net sales and was up 6% with broad-based growth across all regions except Europe.

Diageo said Scotch growth in the period was driven by Johnnie Walker, helped by the launch of “White Walker by Johnnie Walker” inspired by HBO’s global hit “Game of Thrones”, which recruited new consumers into scotch.

Diageo, however, faces potential pressure from U.S. President Donald Trump’s use of tariffs as a weapon in trade conflicts because Scotland’s most famous export could get caught up in the crossfire.

The company also faces headwinds in Scotland, where talks over pay between the company and two of its biggest Scottish unions fell apart on Wednesday, threatening the production of some the region’s most popular whiskies.

FILE PHOTO: A bartender takes a bottle of Johnnie Walker whisky at Barmaglot bar in Almaty, Kazakhstan, June 22, 2017. REUTERS/Shamil Zhumatov/File Photo

“I would say it’s just too early to tell whether that trade dispute between the U.S. and the EU is going to have (an impact)on our industry and to what degree,” Chief Financial Officer Kathryn Mikells told reporters on a call.

“We wouldn’t be immune from a trade war but I think it’s important to remember how resilient Diageo is, given the broad portfolio,” she added.

($1 = 0.8019 pounds)

Reporting by Tanishaa Nadkar and Noor Zainab Hussain in Bengaluru; Editing by Tomasz Janowski and Keith Weir

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