January 30, 2020 / 9:28 AM / 19 days ago

UPDATE 2-Diageo tempers sales growth expectations amid trade uncertainties

* Sees FY underlying net sales growth at lower end of range

* Says lower passenger traffic through Hong Kong

* Scotch sales hurt by economic disruptions in Peru and Chile

* Reports jump in Greater China sales (Adds CFO quote, regional challenges)

By Tanishaa Nadkar and Noor Zainab Hussain

Jan 30 (Reuters) - Diageo, the world’s biggest spirits company, tempered its annual sales growth expectations on Thursday, due partly to tough trading conditions for its key Scotch whisky business in Latin America and the Middle East.

The maker of Johnnie Walker Scotch whisky, Smirnoff vodka and Guinness stout said it expected annual underlying net sales growth to come in towards the lower end of its 4 to 6% mid-term guidance range, amid rising global trade uncertainty.

The company highlighted volatility in India, Latin America and the Caribbean and said it saw reduced inventory levels and lower passenger traffic including through Hong Kong in its travel retail arm.

Chinese-ruled Hong Kong is in the throes of anti-government protests.

Diageo, which sells 200 brands in 180 countries, also said operating profit rose 0.5% to 2.44 billion pounds ($3.21 billion) in the six months ended Dec. 31.

“There is ongoing uncertainty in the global trade environment and we would not be immune from further policy changes,” Chief Executive Officer Ivan Menezes said.

Diageo has faced pressure from U.S. President Donald Trump’s use of tariffs as a weapon in trade conflicts after the United States slapped a 25% tariff on scotch whisky and other European products.

Scotch represents 26% of Diageo’s net sales, with global performance flat in the first half, the company said.

It reported, however, a 24% rise in net sales from the Greater China region, driven by strong performance in both Chinese white spirits and scotch.

CHINA FEARS

Diageo has been streamlining its portfolio in recent years to improve performance and trying to bulk up on more premium as well as trendier brands. It has looked to focus on the emerging markets of China and India.

Many global companies from hotels and airlines to industrial houses are set to face billions of dollars in losses for disruptions caused by a new coronavirus in China.

French-based spirits maker Remy Cointreau last week warned over the potential impact of the virus outbreak on demand for its premium cognac in China.

“It’s way too early to determine the impact it’s (coronavirus) going to have on our business. China is not one of our largest markets ... but it’s something that we’re watching very closely,” Chief Financial Officer Kathryn Mikells said.

The company has issued travel guidance to its employees, she added.

Diageo’s shares were little changed at 3,121.5 pence.

$1 = 0.7608 pounds Reporting by Tanishaa Nadkar and Siddharth Cavale in Bengaluru; Editing by Bernard Orr and Mark Potter

Nuestros Estándares:Los principios Thomson Reuters
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below