Diageo announces buyback as pink gin helps first-half sales

Diageo announces buyback as pink gin helps first-half sales
FILE PHOTO: The museum room is seen at the Diageo Cardhu distillery in Scotland March 21, 2014. REUTERS/Russell Cheyne/File Photo Copyright Russell Cheyne(Reuters)
By Reuters
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By Martinne Geller

LONDON (Reuters) - Britain's Diageo <DGE.L>, the world's largest spirits company, announced a 2 billion pounds share buyback programme on Thursday and better-than-expected sales growth for the full year, helped by a gin boom in Western Europe.

The British maker of Johnnie Walker Scotch and Smirnoff vodka reported net sales of 12.2 billion pounds, up 5 percent on an organic basis, higher than the 4.3 percent growth forecast in a consensus supplied by the company.

The company said Tanqueray gin performed well in Europe and the launch of Gordon's pink gin also offered a boost.

Earnings per share, at 118.6 pence, also beat forecasts.

Diageo stood by its mid-term expectations, saying it still anticipated mid-single digit organic net sales growth and 175 basis points of organic operating margin expansion for the three years ending 30 June 2019.

Yet it forecast some near-term headwinds for the new financial year that started in July, regarding currency exchange rates, tax and interest rates that helped push its shares down 1.5 percent at 0823 GMT.

It said foreign exchange rates would reduce full-year sales by 70 million pounds, and operating profit by 10 million pounds. It expects a tax rate of 21 to 22 percent, up from 20.7 percent in the just-ended year, and also expects higher interest rates to increase its borrowing costs.

Diageo said it approved a share buyback programme of up to 2.0 billion pounds for the year ending 30 June 2019.

(This version of the story corrects buyback currency in first paragraph).

(Reporting by Uday Sampath Kumar and Martinne Geller; Editing by Jason Neely and Edmund Blair)

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