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Diageo cuts 2020 sales outlook as global trade picture remains cloudy

By Amanda Cooper

Diageo cut its 2020 sales outlook, citing uncertainty over trade and volatile markets

London-listed Diageo, the world’s largest spirits maker, cut its sales outlook for this year, citing volatile global markets and uncertainty over trade.

The maker of Tanqueray gin and Smirnoff vodka reported a 4.2 per cent rise in net sales in the first half of its fiscal 2020 year to £7.2bn. Operating profit rose 0.5 per cent to £2.4bn, as organic growth was offset by a weak pound and a series of charges and acquisitions and disposals.

“These results reflect the changes we are making in the business to drive shifts in our culture. They are in line with our current mid-term guidance and have been delivered in the face of increased levels of volatility in India, Latin America and Caribbean and Travel Retail,” said Ivan Menezes, Diageo chief executive.

“For the full year, we therefore expect organic net sales growth to be towards the lower end of our 4 to 6 per cent mid-term guidance range. We continue to expect organic operating profit to grow roughly one percentage point ahead of organic net sales.”

Of the company’s major brands, Tanqueray delivered the strongest increase in sales, which rose 13 percent, thanks to the current popularity of gin among consumers around the world, while whisky-based liqueur Baileys came a close second, with sales growth of 8 percent.

In terms of types of spirit, tequila sales were the strongest, with an increase of 31 per cent, driven largely by sales in North America, Diageo said, while beer sales grew just 2 per cent.

Diageo shares were last down 2 per cent in London, around their lowest in six weeks.

The company also warned that a weaker pound would likely hit net sales for the year ending June 30 2020 to the tune of £110 million, while operating profit would see a £40 million dent.

Uncertainty over the trading relationship between Britain and the European Union once the UK leaves the single market has stripped more than 8 per cent off the value of the pound against the dollar in the last two years.

While this favours UK-based exporters, raw materials priced in other currencies have become more expensive.

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