Diageo, the Guinness Stout and Smirnoff Vodka manufacturer, reported a strong drop in annual net profit on Tuesday and has increased its cost saving goals when US rates hit. The net profit collapsed by 39 % to $ 2.4 billion in its financial year until the end of June, compared to a year earlier, the British group declared in a profit declaration a few weeks after the sudden departure of the crew of the CEO Debra.
Diageo revenues were slightly immersed with $ 20.2 billion.
“Macroeconomic uncertainty and the consequent pressure on consumers” weighed in the alcohol sector, the provisional CEO Nik Jhangiani has declared a “demanding year” for the group.
Diageo last month announced the sharp departure of the crew after two years at the helm.The company had already experienced a difficult commercial environment in view of the announcement in May which had to face a financial blow by the rates of the President of the United States Donald Trump.
Diageo, who also produces Don Julio Tequila, has increased his cost saving program on Tuesday to about $ 625 million in three years, from a previous goal of $ 500 million.
His annual profit was also affected by renovation costs and value loss costs.
The company’s shares, however, have increased by more than six percent in the morning offers on the FTSE 100 index of London while investors have cheered up the new saving objectives on costs and best sales of expected.
Diageo reiterated that he expects that the operating profit suffers from $ 200 million from the Trump rates, even if about half the amount would be compensated by the cost cuts.
His forecasts presuppose that the spirits imported from Mexico and Canada will remain free from the rates, while a 10 % rate will apply on imports from the United Kingdom and a 15 % withdrawal on imports from the European Union.
Diageo added that the sales of key brands Don Julio and Guinness grew 37 percent and 12 %respectively, compensating weakness elsewhere.
Investors “must determine whether the recession of alcohol consumption is a short -term effect of the available income squeezed or the beginning of a wider trend from drinking completely for health and lifestyle reasons”, said the director of the investments of AJ Bell Russ.
“Sales of some brands could be on the agenda for any new leader on the way, given the need to obtain the budget in a better form, even if the company will not want to lose any of its crown jewels”.
