Shares in Diageo plunged nearly 10 per cent on Monday morning after it reported a decline in annual profit on Tuesday as issues in Latin America continued to weigh on the world’s largest spirit maker’s performance.
The FTSE 100 firm, which as well as spirits sells Guinness and Baileys, saw a dent in profit of $304m (£237m) – or 4.8 per cent – almost all of which was attributable to Latin America, where the effects the profit warning it issued towards the end of last year continue to be felt.
Sales at the Jonnie Walker maker were also down 1.4 per cent, which it blamed on currency exchange rates.
Cash flow improved by $0.5bn (£0.3bn) to $4.1 (£3.2bn), according to the preliminary results, helping it to increase its full year dividend by five per cent to 103.5 cents per share.
Debra Crew, Diageo’s chief executive, said: “While fiscal 24 was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves.”
The results, which yesterday had been billed as an exercise in “deck clearing” by analysts at Citi, were the first full year figures from the firm’s new CEO Deborah Crew, who took over from Sir Ivan Menzes after his death just weeks before he planned to retire.
Crew’s first year at the helm has been something of a baptism of fire, with a weaker economy in China, one of the drinks giants largest markets, and softening demand in the US both weighing on its results.
But neither region compared to the fall off in sales it has seen in Latin America, where net sales shrunk nearly 18 per cent in its previous half-year results. The issues continued to plague the firm in its full year reporting, and which have been further worsened by the higher-than-expected inventory it now has due to sales drying up.
Crew added: “Fiscal 24 was impacted by materially weaker performance in LAC. Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions.
“This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year.”