By Victoria Masterson
Drinks group Diageo saw its shares fall more than 9% in early trading as is reported a worse-than-expected 4.8 per cent drop in annual profits, fuelled mostly by big sales falls in Latin America and the Caribbean.
The company, which produces brands including Guinness, Smirnoff and Johnnie Walker, reported a $304 million fall in operating profits to $6 billion as sales for the year to 30 June declined 0.6% to $20.3 billion.
Diageo said $302m of this drop was attributable to Latin America and the Caribbean, where sales fell more than 21% as consumers turned to cheaper drinks and local spirits. Analysts had expected a 4.5% fall in annual operating profits.
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Debra Crew, Diageo chief executive, described 2024 as a “challenging year for both our industry and Diageo.” She added: “With continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves.”
Excluding the impact of Latin America and the Caribbean, Diageo said organic net sales – sales from existing operations – grew 1.8%. This was driven by “resilient growth” in the company’s Africa, Asia Pacific and Europe regions.
Highlights include 5% sales growth in Britain, driven mostly by a strong performance from Guinness, and 18% growth in beer sales across Europe.
Asia Pacific also saw sales growth of 4%, driven by strong growth of Chinese white spirits in Greater China, and other whisky and scotch products in India.
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Analyst Chris Beckett, head of equity research at Quilter Cheviot, described Diageo’s results as “disappointing but not catastrophic.” He said: “Consumer spending, particularly in the US, has become more cautious, leading to a normalisation of growth trends that surged during the pandemic.”
But he added: “the long-term outlook for the industry remains positive due to Diageo's strong brand portfolio. The key to recovery will be an improvement in consumer confidence and financial stability.”
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