DGE Strategy ??4 Feb 2025 09:03
Diageo reported a decline in half-year earnings, hurt by "unfavourable" foreign exchange developments, and the brewer and distiller also said the speed of a recovery in some key markets has been slower than expected. The firm also reported it has made "considerable contingency planning" in recent months in regard to potential US tariffs, which it said will may affect its tequila portfolio and Canadian whisky. "Given our extensive supply chain and broad and advantaged portfolio, there are a number of possible actions to help mitigate the potential impact including pricing and promotion management, inventory management, supply chain optimisation and re-allocation of investments. Some of these actions can be implemented rapidly and others will take time. We will continue to be agile and respond with speed as key details are confirmed," Diageo added. Diageo reported pretax profit of USD2.77 billion in the six months to December 31, a fall of 9.9% from USD3.08 billion. The Guinness owner said sales were largely flat at USD15.18 billion, while net sales fell 0.6% to USD10.90 billion from USD10.96 billion. Net sales exclude excise duties. It put the net sales fall down to "unfavourable foreign exchange", but noted net sales rose on an organic basis. Diageo Chief Executive Debra Crew said: "Our fiscal 25 first half results marked a return to growth, delivering organic net sales growth of 1% despite a challenging industry backdrop as consumers continue to navigate through inflationary pressures. Growth in four of our five regions was supported by market share gains. Notably, in North America, we outperformed the market with high quality share growth and positive organic net sales growth." Crew added: "While the pace of recovery has been slower in several key markets, we remain confident of favourable long-term industry undamentals and more importantly in our ability to outperform the market. Spirits remains an attractive sector with a long runway for growth, as we expect to continue to gain share." Diageo maintained its interim dividend at 40.50 cents per share. Diageo said that before the impact of tariffs, it would have expected to "build on the momentum seen in the first half". It would have "expected to deliver a sequential improvement in organic net sales growth compared with the first half". "The confirmation at the weekend of the implementation of tariffs in the US could however impact this building momentum. We still expect to continue to deliver strong market share performance," it added. Diageo continued: "Before taking into consideration the potential impact of tariffs we had expected a slight decline in organic operating profit in the second half of [financial] 25 compared with the prior year, broadly in line with the decline in the first half, reflecting higher staff costs, and continued strategicinvestments including in digital and US route-to-market. Clearly the implementation of tariffs could further impact this and when we can more accura
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