Business
Guinness maker Diageo to slash costs after profit slump
The maker of Guinness stout, Don Julio tequila and Smirnoff vodka, took a $1.5-billion impairment on its operations largely related to Turkey, which has been hit by hyperinflation.
Drinks maker Diageo reported Thursday slumping annual profits despite a late boost from the football World Cup. (© Andy Rain/EPA/Shutterstock)
By: AFP ., Journalist @New Vision
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Drinks maker Diageo reported Thursday slumping annual profits despite a late boost from the football World Cup, causing it to slash costs by $1 billion over three years.
Net profit slid 26 percent to $1.74 billion in the year to June 30 compared with Diageo's previous financial year, the company said in an earnings statement.
The maker of Guinness stout, Don Julio tequila and Smirnoff vodka, took a $1.5-billion impairment on its operations largely related to Turkey, which has been hit by hyperinflation.
It also took a write-down on its Don Papa rum brand, with profits hit also by restructuring charges.
Total group sales fell nearly one percent on the year to $27.76 billion.
But Diageo's share price jumped seven percent to top London's top-tier FTSE 100 as investors welcomed news of further planned cuts to costs.
"This new strategy, executing with a new, more agile, competitive and cost-effective operating model, gives us confidence that we can return Diageo to a business consistently creating value for shareholders," chief executive Dave Lewis said in the statement.
Total group sales fell nearly one percent on the year to $27.76 billion.
But Diageo's share price jumped seven percent to top London's top-tier FTSE 100 as investors welcomed news of further planned cuts to costs.
"This new strategy, executing with a new, more agile, competitive and cost-effective operating model, gives us confidence that we can return Diageo to a business consistently creating value for shareholders," chief executive Dave Lewis said in the statement.
Lewis, a former CEO of British supermarket giant Tesco, had in January replaced Debra Crew, who struggled against weak sales in the United States and China amid President Donald Trump's tariffs onslaught.
The latest annual performance was also impacted by weak sales in North America despite businesses stocking up ahead of the World Cup matches held in the United States, Canada and Mexico that ended last month.
Diageo, whose brands include Johnnie Walker whisky and Baileys liqueur, said it saw weakness also in the Asia Pacific market, which offset growth in Europe, Latin America and the Caribbean as well as across Africa.
"We are focused on recovering our competitiveness in [North America], and we are working through the consequences of government policy in Chinese white spirits," Lewis said Thursday.
China last year banned alcohol at official events, affecting Diageo's brand of baijiu, a popular liquor.
The latest annual performance was also impacted by weak sales in North America despite businesses stocking up ahead of the World Cup matches held in the United States, Canada and Mexico that ended last month.
Diageo, whose brands include Johnnie Walker whisky and Baileys liqueur, said it saw weakness also in the Asia Pacific market, which offset growth in Europe, Latin America and the Caribbean as well as across Africa.
"We are focused on recovering our competitiveness in [North America], and we are working through the consequences of government policy in Chinese white spirits," Lewis said Thursday.
China last year banned alcohol at official events, affecting Diageo's brand of baijiu, a popular liquor.