Strategic Financial Analysis - Diageo Whiskey Company

Topics: Discounted cash flow, Asset, Balance sheet Pages: 8 (2497 words) Published: April 11, 2013
Diageo Whiskey Company Analysis

Diageo holds a title of being the globe’s largest producer of whisky, connected to some 29 distilleries and warehouses storing seven million casks of maturing spirits. Their products are sold in more than 180 countries and the company holds offices in 80 countries. Diageo’s best-selling brand (Johnnie Walker) has been sold in the fiscal year of 2011 in an astonishing amount of 17.8 million “nine-liter cases”, which were mainly traded overseas. The demand for whisky globally is rising since the 1990s at that time the market was deemed “flat”, while according to the Scotch whisky association exports of scotch were valued at £3 billion in the first nine months of the year 2011, which is a year-to-year increase of 23%. Due to population increase and higher incomes, demand for whisky is rising, yet the US and France still remain the dominant markets for whisky, although Christian Porta, the chairman and chief executive of the company’s scotch business has mentioned Poland, Turkey, Russia, Mexico and Brazil as “particularly dynamic” markets, opportunity is there.(Zekaria, 2012)

Question 1
Chart 1, Diageo plc Common Stock (DEO.L) .LSE


Chart 1, displays Diageo’s stock behavior within a period of 12 months,on march 25 2011 the stock was worth £1170, up until before the summer of August 2011 Diageo’s stock was doing pretty well, but then hit a “downward” phase mainly caused because of the European financial debt crisis, which in-turn caused investors to be more restrained with their money which lead to the stock’s decrease.

A grate contributor to this problem was also the lack of pro-active and progressive strategic plan when coming up for solutions to Greece, Portugal and Spain’s economic crisis, the stock’s record low being noted as £1112 in August 12 2011.

The stock’s biggest crisis did not last for long nor did it have long lasting negative effects upon the stock. As it could be observed by the start of September the stock has rapidly restored, this may-be due to a promised large injection of 500bln Euros into European banks’ capitals, (CNNMoney; 2012) which was later accompanied by another bailout package introduced in February which gave a large boost to the economy.

On March 12, 2012, the stock hit record high within the period of 12 months which was £1553, the noted percentage increase within that period (March 25 2011 to March 23 2012) derived by recorded stock indexes (1170 for 25 March 2011 and 1510 in 23 March 2012) the increase- was 0.291%.

Question 2
Chart 2, Diageo Stock Chart, DIAGEO (DGE.L) .LSE

In the chart above (Chart 2) is a comparison of Diageo’s stock (Blue Line) at base value of 852.50 recorded on May 26, 2009, with relevance to the FTSE 100 (Red line) with its base value being 4411.70 recorded on May 26, 2009. This specific observation is used as Diageo’s stock is being compared to FTSE 100 which disabled us from using exact values and therefore we have resorted to this chart.

The period that the chart’s data is elapsed upon is three years (from May 26 2009 to March 23 2012) at the start of this time span its financial crisis erupting from the US to the European markets, a steady recovery could be observed at center and later phases of the chart.

Diageo was doing as good as the FTSE 100 in the earlier stages of this time span, even in some periods of time mimicking FTSE 100’s performance as they are correlated to a certain degree since Diageo is a part of the FTSE 100. Until the start of April 2011 there was no significant difference between the two when it came to their performance on the stock exchange. In April Diageo published results of the previous fiscal year and it exceeded preliminary expectations. It sent stock rallying until late July when the growth was replaced by rapid decline lasting for 8 days. At this time FTSE 100 Index was on decline as well. Later in the month United States...
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