World: Diageo sees sharp fall in half-year profits
Diageo, the British drinks giants which owns Guinness, Carlsberg and Bailey’s, saw a sharp fall in profits for the first six months of its 2024 financial year due to ongoing weakness in its US and Latin America business.
On Tuesday January 30, the company posted an 11 per cent decline in operating profits to £3.3 billion for the six months to the end of December 2023, as profit margins narrowed sharply to just over 30 per cent. The company blamed the decline on weak organic growth, increased marketing spend and once-off costs.
Overall, Diageo reported a 1 per cent decline in half year sales to just under £11 billion, which was predominantly driven by a 23 per cent decline in its Latin America business and a 1.5 per cent drop in US sales. The British drinks company said the first half of its 2024 financial year had been “challenging” due to a patchy global consumer environment.
Despite the weak start to its 2024 financial year, Diageo increased its half year dividend by 5 per cent to 40.5 cents per share in a bid to calm investors fears about the health of the company.
The company also reiterated its medium-term guidance of organic sales growing in the range of 5 per cent to 7 per cent, with operating profit growing at a similar rate. Diageo said it will make progress toward that goal in the year through June 2025.
In the last 12 months, shares in Diageo have tanked almost 20 per cent in value, wiping billions off the company’s market value.
“We are not satisfied with these results, and I personally am restless to get the business to perform at its full potential,” Debra Crew, chief executive of Diageo said.
“The first half of fiscal 2024 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year and faced an uneven global consumer environment
“As previously announced in November 2023, materially weaker performance in Latin America, driven by fast-changing consumer sentiment and high inventory levels, significantly impacted total business performance.
“Having conducted a review of inventory levels and monitored performance in the critical holiday season, we have taken action and have further plans to reduce inventory to more appropriate levels for the current consumer environment in the region by the end of fiscal 2024. This is a key priority,” she added.
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