Diageo Profit Falls, Dragged by Sales Decline in Latin America, Caribbean — Update

By Michael Susin

Diageo said profit for the first half of its fiscal 2024 fell, dragged by a sharp decline in sales at its Latin American and Caribbean divisions.

In its first earnings release reported in dollars, the London-based maker of Johnnie Walker scotch whisky, Guinness stout and Smirnoff vodka said Tuesday that it made a pretax profit of $3.08 billion for the six months ended Dec. 31 compared with $3.60 billion for the same period a year earlier.

Organic net sales declined 0.6%, missing company-provided market expectations of a flat growth, and reflecting an organic volume decline of 5%, which was partially offset by positive price/mix--the value of the product determined by the producers--of 4.6% delivered across all other regions.

"The decline in Latin America and Caribbean was driven by a strong double-digit net sales growth comparator as well as lower consumption and consumer downtrading due to macroeconomic pressures in the region," it said.

The region, which accounts for 11% of the company's total revenue, posted a 23% fall in sales, while operating profit deteriorated 41%.

"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," Chief Executive Debra Crew said.

Overall, net sales fell to $10.97 billion from $11.12 billion the prior year.

Operating profit came in at $3.32 billion compared with $3.73 billion. Analysts estimated that organic operating profit growth would decrease 4.7%, according to a company-provided market consensus.

The board declared a dividend increase of 5% to 40.5 cents a share.

Looking ahead to the second half of fiscal 2024, Diageo expects to deliver improvement in organic net sales and organic operating profit growth compared to the first half despite continued global economic volatility.

Diageo also backed its medium-term sales growth, expected to be between 5% and 7%, with its organic net sales growth trajectory improving in fiscal 2025.

"We expect organic operating profit growth in fiscal 2025 to be broadly in line with organic net sales growth," it said.

Write to Michael Susin at michael.susin@wsj.com

(END) Dow Jones Newswires

January 30, 2024 03:10 ET (08:10 GMT)

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