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Diageo: currency moves to shave £45m off profit

Johnnie Walker maker Diageo is forecasting its fiscal 2019 operating profit to fall by £45 million (US$59.4m) as a result of market volatility.

Drinks giant Diageo has warned that currency volatility will hit profits and sales this year

In a trading update yesterday (20 September), issued ahead of the group’s annual general meeting, Diageo CEO Ivan Menezes said that based on current exchange rates, he also expects a reported net sales loss of £175m (US$230m).

“In recent weeks, we have experienced some increased emerging market foreign exchange volatility, which has been partially offset by a strengthening of the dollar,” the executive said.

However, Menezes reassured that the year “started well” and that the firm’s performance was still in line with expectations.

He said: “We continue to execute our strategy with discipline and agility and despite seeing increased volatility in some markets we continue to expect organic net sales growth in F19 to be broadly in line with last fiscal year and consistent with our medium-term guidance of mid-single-digit growth.”

Menezes added that the group is “focused on delivering both growth and efficiency”, which will allow Diageo to “reinvest” in the business to “support the long-term growth” of its brands.

“We continue to expect to grow organic operating margins in line with our guidance of 175bps of margin expansion in the three years ending 30 June 2019,” he said.

In its 2018 fiscal year, Diageo’s organic net sales increased by 5% to £12.2 billion (US$16.1bn).

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