- Decline due to ‘materially weaker performance’ in Latina America and Caribbean
- Firm expects net sales value to fall by more than 20% year-on-year in fiscal 24
Diageo shares plummeted after the drinks giant said it expects operating profits to slow after a fall in sales in Latin America and the Caribbean.
The London-listed drinks group, whose brands include Johnnie Walker and Guinness, told investors that its predicted fall in operating profits was down to ‘materially weaker performance’ in the regions.
Latin America and Caribbean revenues, which make up 11 per cent of Diageo’s net sales value, are now expected to decline by more than 20 per cent year-on-year in the first half of the group’s financial year.
The drinks group, whose brands include Johnnie Walker and Guinness, said that its predicted fall in operating profits was down to ‘materially weaker performance’
Djageo shares were down 13.70 per cent to 2,800.50p in Friday morning trading.
In a trading update, the firm said: ‘We now expect organic operating profit growth for the first half of fiscal 24 to decline compared to the first half of fiscal 23, primarily due to LAC’s declining net sales, increased trade investment, lower operating leverage and adverse mix resulting from downtrading.
‘Looking ahead to the second half of fiscal 24, at the group level, we expect to see a gradual improvement in organic net sales and organic operating profit growth from the first half of fiscal 24 while we continue to invest in marketing, and in the business, to drive long-term sustainable growth.’
In August, the firm reported booming profits for the last year thanks to price rises and drinkers around the world turning to more expensive tipples.
The Smirnoff vodka maker said pre-tax profit rose 7 per cent £4.7billion for the year to the end of June, from £4.4billion the year before.
Victoria Scholar, head of investment at Interactive Investor said: ‘Macroeconomic headwinds are dampening demand for Diageo’s offering in the Caribbean and Latin America.
‘The consumer slowdown is prompting customers to switch to cheaper substitute drinks instead, weighing on Diageo’s branded sales. In Europe and Asia Pacific, it also expects slower momentum in the current half year.
‘Trading down among consumers is a key risk to Diageo’s strategy which has been to focus on quality over quantity. The economic downturn is likely to mean fewer consumers are willing or able to pay more for expensive high margin premium spirits.’
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