Guinness owner Diageo ups savings as US tariffs hit
, the maker of
Guinness
stout and Smirnoff Vodka, reported Tuesday a sharp drop in
annual net profit
and raised its cost-savings targets as
US tariffs
hit.
Net profit tumbled 39 percent to $2.4 billion in its financial year to the end of June, compared with one year earlier, the British group said in an earnings statement just weeks after the sudden departure of chief executive
Debra Crew
.
Diageo's revenue dipped slightly to $20.2 billion.
"Macroeconomic uncertainty and the resulting pressure on consumers" has weighed on the
spirits sector
, interim CEO Nik Jhangiani said of a "challenging year" for the group.
Diageo last month announced the abrupt departure of Crew after two years at the helm.
The company had already experienced a tough trading environment ahead of announcing in May that it faced a financial hit from US President Donald Trump's tariffs onslaught.
Diageo, which also makes
Don Julio tequila
, ramped up its cost-saving programme on Tuesday to around $625 million over three years, from a previous target of $500 million.
Its annual profit was hit also by restructuring costs and impairment charges.
Shares in the company, however, jumped more than six percent in morning deals on London's FTSE 100 index as investors cheered the new
cost-saving targets
and better-than-expected sales.
Diageo reiterated that it expects operating profit to take a $200-million hit from Trump's tariffs, though around half the amount would be offset by cuts to costs.
Its forecasts assume that spirits imported from Mexico and Canada will remain exempt from tariffs, while a 10-percent tariff on imports from the UK and a 15-percent levy on imports from the European Union will apply.
Diageo added that sales of key brands Don Julio and Guinness stout grew 37 percent and 12 percent respectively, offsetting weakness elsewhere.
Investors "need to determine if the downturn in alcohol consumption is a short-term effect of squeezed disposable income or the start of a broader trend away from drinking altogether for health and lifestyle reasons", said AJ Bell investment director Russ Mould.
"Sales of some brands may be on the agenda for any incoming new boss given a need to get the balance sheet in better shape -- although the company will not want to lose any of its crown jewels."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
24 minutes ago
- Mint
Orsted Fails to Convince Investors It's Through The Worst
(Bloomberg) -- Management of Orsted A/S failed to convince analysts and investors that the company is at a turning point after losing nearly one third of its value from announcing it would sell shares. The offshore wind farm developer plunged the most on record as investors digested a planned rights issue that's effectively a handout by the Danish government. The state plans to buy just above half of the securities. The offshore wind pioneer was briefly more valuable than British oil major BP Plc at the height of the green investing boom just a few years ago. After a series of writedowns, cancellations of three major projects, the replacement of its top executives and two turnaround plans, the company announced the biggest rights issue for a European energy company in more than 15 years. It aims to raise 60 billion Danish kroner ($9.3 billion). It's the latest example in a years-long effort by the company to convince investors that it has its finances under control after soaring costs and rising interest rates upended its business model. It first announced impairments on its US projects in 2023, the start of a series of bad news that it assured investors each time would be contained. On top of that, there's the impact of US President Donald Trump and his dislike for wind turbines that's creating negative sentiment. So far, investors appear unconvinced that this is a buying opportunity. While the Danish government has agreed to purchase shares, it's unclear what appetite other existing investors will have. And there's not yet a fixed price for the underwritten shares, the company's Chief Financial Officer Trond Westlie said Monday. 'The analyst call did little to provide incremental comfort around the risk-reward skew,'Ahmed Farman, analyst at Jefferies International Ltd., said in a note. 'We see execution risks on aspects of the new plan, as well as limited medium-term growth prospects.' Shares in the company fell as much as 32% on Monday, revealing skepticism that the capital raise will be enough to fix the company for good and return it to a pathway of predictability, profitability and growth. Orsted said on Monday that financing costs for one site - Sunrise Wind, off the coast of New York's Montauk Point - had climbed significantly due to uncertainty for the sector created by Trump. The company halted the process for a partial sale on Monday saying that full ownership of the project was one of the key reasons it needs capital. The company typically funds growth by selling stakes in wind farms that are close to completion. The impact of canceling the stake sale in Sunrise was estimated at 40 billion Danish kroner, a sum that appears high, according to Deepa Venkateswaran, analyst at Bernstein. This leaves open the possibility that the figure could be masking impacts on other projects like a wind farm sale in the UK or further political risk in the US, Venkateswaran said in a note. 'We therefore wonder if there are other risks that the company is being less open about,' she said. Orsted management cited the move by the Trump administration to halt an already-permitted offshore wind farm that was being developed by Norway's Equinor ASA, as a tipping point. It was an unprecedented move that underscored the risks of investing in offshore wind in the US while President Trump is in office. While the decision was ultimately reversed, it derailed plans Orsted was carrying out to finance and sell a stake in its Sunrise Wind farm. Equinor is the second-largest shareholder in Orsted and the value of its stake has already dropped by over $1 billion since the deal was announced last year. 'The perceived risks of the US offshore wind market among investors and banks increased significantly,' Orsted's Chief Executive Officer Rasmus Errboe said on a call with analysts. 'Investors involved in the equity process substantially increased their required risk protections and return requirements and the banks involved on project financing ultimately were not able to continue the process under current market conditions without material risk protections.' Ultimately the share sale will be a test of Orsted's continued bet on offshore wind. The company built its first wind farm at sea off the coast of Denmark more than 30 years ago and has been instrumental in the sector's growth from niche to one of Europe's most important sources of new renewable power generation. 'Despite the headwinds that offshore wind has an industry has faced in recent years, we continue to see a very strong outlook for the technology, particularly in Europe where electricity demand is projected to more than double by 2050,' Errboe said. 'We remain 100% committed to the continued construction of our program.' Many of Orsted's biggest competitors in offshore wind have refocused on other parts of their businesses. Iberdrola SA and SSE Plc are ramping up spending on electric grids. Meanwhile oil majors Shell Plc and BP Plc have pulled back from the sector to focus on the oil and gas businesses that drive their profits. But Orsted doesn't have much else besides offshore wind. It announced plans to sell its European onshore wind business Monday and while it also has some biomass plants in Denmark and an onshore renewables business in the US, those are insignificant compared to offshore wind, which makes up the vast majority of its profit and investments. And it's not clear how steady the outlook for offshore wind will remain in Europe. Rising costs have led to a series of failed auctions, most recently in Germany. The response from industry has been to urge governments to provide subsidies that guarantee wind farm owners fixed prices for power. And with high energy prices still stinging Europe's economy, government appetite to pay up may shrink. --With assistance from Eamon Akil Farhat. More stories like this are available on
&w=3840&q=100)
Business Standard
an hour ago
- Business Standard
Tata's Nelco, Eutelsat to offer OneWeb LEO satellite services in India
Tata Group company Nelco has signed an agreement with French satellite services provider Eutelsat to deliver OneWeb low Earth orbit (LEO) satellite connectivity services across India, the two companies said. Under the agreement, Nelco will partner with OneWeb India Communications to provide secure, low-latency LEO connectivity to customers in India. OneWeb India Communications is the domestic entity for Eutelsat's operations in the country. 'Service coverage will extend across India's borders, territorial waters, and remote regions, supporting a wide range of secure government and enterprise applications. These capabilities will strengthen India's digital infrastructure and national security while ensuring reliable connectivity in underserved areas,' Nelco said in a statement. These services will be offered as soon as OneWeb's LEO commercial operation in India begins, the company added. OneWeb, a satellite services company backed by India's Bharti Enterprises, merged with Eutelsat in 2023 to become the world's second-largest satellite operator, with 669 satellites in orbit. In July this year, the British government announced an investment of €163 million in Eutelsat through a reserved capital increase, expanding the total amount planned to be raised by the French satellite services provider to €1.5 billion. Bharti Space Limited had then said it would also increase its investment commitment to €150 million. Earlier in May, the Indian government cleared Elon Musk's Starlink licence to operate satellite internet services in the country, more than two years after the US firm applied for it. Starlink provides satellite communications in over 125 countries through a constellation of more than 7,600 LEO satellites operated by SpaceX, the American spacecraft manufacturer, launch service provider, and satellite communications company owned by Musk.
The Print
an hour ago
- The Print
India 'committed' to peaceful resolution of Russia-Ukraine conflict
According to the Indian readout of the call, the two leaders also reviewed the 'progress' of bilateral ties. The call comes ahead of a summit in Alaska between US President Donald Trump and Russian President Vladimir Putin on 15 August. 'I conveyed India's consistent position on the need for an early and peaceful resolution of the conflict. India remains committed to making every possible contribution in this regard, as well as to further strengthening bilateral ties with Ukraine,' Modi said in a post on social media platform X. New Delhi: Prime Minister Narendra Modi affirmed India's support for a peaceful settlement of the Russia-Ukraine conflict, during a conversation Monday with Ukrainian President Volodymyr Zelenskyy. The call between the two leaders comes amidst US' pressure on India to stop purchasing Russian oil. The two presidents are set to negotiate a settlement to pause the ongoing war started by Moscow against Kyiv in February 2022. The almost four-year conflict has Moscow sidelined by Western leaders, with the Trump-Putin summit to be the first between leaders of the two countries since 2021. 'We also discussed in detail the sanctions against Russia. I noted that it is necessary to limit the export of Russian energy, particularly oil, to reduce its potential and ability to finance the continuation of this war. It is important that every leader who has tangible leverage over Russia sends the corresponding signals to Moscow,' the Ukrainian president said in a post on X. 'It is important that every leader who has tangible leverage over Russia sends the corresponding signals to Moscow.' The two leaders also discussed a potential meeting on the margins of the United Nations meeting in New York City next month and a potential bilateral visit. Modi was expected to meet Zelenskyy at the G7 summit held in Canada a couple of months ago. However, the meeting had to be postponed. India is the second largest importer of Russian oil in the world after China. In the 2024-2025 financial year, India imported roughly $56 billion worth of oil from Russia. New Delhi's purchase of Russian oil has grown during the war, from worth around $7 billion prior to 2022 to worth over $50 billion for the last two years running. India's purchase of Russian oil increased as the G7 countries (Canada, France, Germany, Italy, Japan, the UK, the US, and the European Union) imposed a price cap, limiting Moscow's cost per barrel of oil to below $60. The system was designed to prevent shocks to the global energy markets while minimising Russian revenue from crude sale. In recent weeks, Trump took aim at New Delhi's purchase of Russian oil. On 6 August, the American President announced the imposition of 25 per cent additional tariffs on goods imported to the US from India, which is set to take effect at the end of this month. This 'penalty' tariff is above an already existing tariff rate of 25 per cent, that came into effect on 7 August. India and the US spent months negotiating a mini-trade deal after the American president first announced his reciprocal tariff policy on 2 April. However, negotiations broke down over the US' push for greater market access to India's agricultural and dairy sector. New Delhi has been willing to make certain concessions to the US in these two sectors, however, the two sides are yet to find a workable solution. Trump further called India a 'dead economy' as his ire at the stalled negotiations grew. Also Read: India lets Ukraine know that Zelenskyy's comment on Modi was 'unfounded' US push for direct talks Similarly, the American President grew frustrated over the pace of negotiations for a ceasefire deal between Moscow and Kyiv. On the campaign trail last year, Trump had promised to end the war within 24 hours of taking over as the president. However, almost eight months into his second term, the US has been unable to move Russia and Ukraine towards a ceasefire deal. The Alaska summit between Trump and Putin is a part of the US President's latest push to find a solution to the conflict. However, Ukraine has pre-emptively rejected any deal that would require it to cede territory to Russia. Moscow has sought to annex the provinces within the Donbass region including Donetsk and Luhansk, apart from staking claim to Zaporhizhia and Kherson. Russia has been in control of Crimea since 2014, another province it annexed from Ukraine. Zelenskyy has been on a diplomatic blitz, holding calls with a number of leaders in the last few days to shore up support for Ukraine's position. The European countries, including France, Germany and the UK, have come out in support of Kyiv, urging any solution to the conflict to include Ukraine at the table. However, the Kremlin believes that there is not enough on the table yet for a direct meeting between Putin and Zelenskyy. (Edited by Ajeet Tiwari) Also Read: Not the time for war, Modi says in message to Putin, advises Zelensky 'resolution not on battlefield'
