Diageo Reports Decline in Profit for First Half of Fiscal 2024

by Warren Seah

Diageo, the London-based maker of popular alcoholic beverages such as Johnnie Walker, Guinness, and Smirnoff, has announced a decrease in profit for the first half of its fiscal year 2024. The decline was mainly attributed to a significant drop in sales within its Latin American and Caribbean divisions.

In the company’s latest earnings release, reported in dollars, Diageo revealed a pretax profit of $3.08 billion for the six-month period ending on December 31, as compared to $3.60 billion during the same timeframe in the previous year.

Although Diageo experienced a 0.6% decline in organic net sales, which fell below market expectations of flat growth, there was a noticeable organic volume decrease of 5%. However, this was partly offset by a positive price/mix factor of 4.6%, reflecting the value determined by the producers across all other regions.

The company explained that the decline in Latin America and the Caribbean was primarily driven by a strong double-digit net sales growth comparator from the previous year and lower consumption, as well as consumer downtrading due to macroeconomic pressures in the region.

With Latin America and the Caribbean accounting for approximately 11% of Diageo’s total revenue, sales in this region took a hit with a significant 23% decrease. Furthermore, operating profit deteriorated by 41%.

Diageo remains committed to addressing these challenges and exploring opportunities for growth moving forward.

Diageo Plans to Reduce Inventory and Announces Financial Results

Diageo, a leading alcoholic beverages company, has taken action and disclosed their plans to reduce inventory in order to align with the current consumer environment in the region. Chief Executive Debra Crew emphasized that this is a key priority for the company, with the aim of achieving more appropriate inventory levels by the end of fiscal 2024.

In terms of financial performance, Diageo reported a decrease in net sales from $11.12 billion to $10.97 billion compared to the previous year. Similarly, operating profit saw a decline from $3.73 billion to $3.32 billion. According to market consensus provided by the company, analysts estimated a 4.7% decrease in organic operating profit growth.

Despite the global economic volatility experienced, Diageo remains optimistic about the future. They expect improvement in both organic net sales and organic operating profit growth during the second half of fiscal 2024. Additionally, the company backs its medium-term sales growth projection of 5% to 7%, with an anticipated improvement in organic net sales growth in fiscal 2025.

Diageo affirmed that their focus is on aligning organic operating profit growth with organic net sales growth in fiscal 2025.

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