Diageo looks to Guinness for boost with challenging times ahead
Tariffs, cautious consumer demand and increased cost pressures have weighed down businesses across the drinks industry.
Diageo is expected to reveal a drop in profits for the last year when it unveils its latest finances tomorrow, after seeing a slowdown in revenue growth.
Analysts have predicted that Diageo will report an operating profit of $5.65bn (€4.87bn) for the year to the end of June.
It would reflect a drop after posting a $6bn profit a year earlier.
Meanwhile, it is also expected to reveal organic net sales growth of 1.4pc for the year.
Diageo has been buoyed by strong sales of Guinness over the last year, particularly in the UK and Europe, helping to offset declines in some key spirits categories, such as vodka.
The group's sales are mainly driven by spirits
While Diageo is known in Ireland primarily for its beer business, the group's sales are mainly driven by spirits.
Its portfolio includes global brands including Smirnoff, Tanqueray, Captain Morgan and Baileys, as well as a stake in Moet Hennessy.
Top-shelf spirits had a run of success around the time of the Covid-19 pandemic, as people drinking at home experimented with time-consuming cocktails and opted for higher-priced brands.
However, demand then fell off and cooled outright in some markets, including China and the US.
The incoming tariff of 15pc on drinks shipped from Europe, Mexico and Canada into the US add a further headache.
In its previous update to investors, Diageo reported that net sales grew by 2.9pc to $4.37bn for the three months to March 31, as it benefited from increased activity in North America, evidence of stockpiling before tariffs came into effect.
In May, the group also launched a $500m cost-saving programme, in order to support further investment and improve its financial position.
Last month, the company revealed Debra Crew had stepped down as chief executive with 'immediate effect' and by 'mutual agreement', amid the drop in the firm's value.
AJ Bell's analyst Russ Mould said her departure 'does not provide a huge amount of confidence in the full-year figures to the end of June from the drinks giant'.
Mr Mould added: 'That said, Crew and management stuck to their prior guidance for 2025 and 2026 alongside May's trading update, and that steer will provide the benchmark for these numbers, which will be presented by Nik Jhangiani, who is both interim chief executive and the chief financial officer.'
Investors and analysts will also be holding out for a fresh update on how the company will deal with ongoing tariff costs amid efforts to mitigate the impact of the US administration's increases to import taxes.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: 'Markets will be keeping a close eye on just how well Diageo is managing these ongoing tariff headwinds, which were expected to add around $150m in annual costs.
'The Johnnie Walker and Guinness maker plans to absorb half through operational efficiencies, with the rest likely passed on through price increases.'
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