Guinness Owner Diageo Ups Savings 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."
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April 5: Trump's 10% minimum tariff on nearly all countries and territories takes effect. April 9: Trump's higher "reciprocal" rate goes into effect, but his administration says just hours later it is pausing higher rates while maintaining the 10% levy on most global imports. April 10: EU suspends its steel and aluminium tariff retaliation measures for 90 days — those measures were a response to Trump's 25% tariffs on imported steel and aluminium that took effect in March. May 23: Trump threatens a 50% tax on all imports from the EU as well as a 25% tariff on smartphones unless those products are made in America. Trump says frustrated by lack of progress in talks with EU, writing on Truth Social: "Our discussions with them are going nowhere!" May 26: Trump says the US will delay implementation of a 50% tariff on goods from the EU from June 1 until July 9 to buy time for negotiations with the bloc. 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August 6: Trump announces a further 25% tariff rate on India's imports due to their purchase of Russian oil, bringing the total to 50%. US President Donald Trump said Wednesday he signed an executive order to impose an additional 25% tariff on India. He cited India's continued purchase of Russian oil. The order comes just a day before a separate 25% tariff on Indian goods was due to take effect. The latest decision is set to come into force in three weeks. Trump had threatend allies of Russia to stop importing oil from Moscow or face high tariffs. Ties between the US and India have taken a downturn as they failed to reach a trade agreement to avert Trump's tariffs. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video US President Donald Trump's tariffs on the EU and other trading partners are set to finally come into effect on Friday, following numerous delays since his first "Liberation Day" announcement back in April. The tariff threats have triggered widespread uncertainty and concerns about the impact on the global economy. Countries facing heavy tariff rates have sought to make deals with the Trump administration, but have also threatened to impose their own counter tariffs. Stick with our Trump tariffs blog for the latest updates, analysis and explainers.
