£1.3bn hit for whisky maker Diageo

Hannah Uttley
·2-min read
Johnnie Walker
Johnnie Walker

Annual profits at Diageo dropped by more than half as the world’s biggest spirits maker took a £1.3bn sales hit from lockdowns across the world.

The owner of Guinness and Johnnie Walker whisky said pre-tax profits tumbled 52pc to £2bn in the year to June 30, with net sales falling 8pc to £11.8bn - slightly worse than analysts' forecasts. 

Shares dropped 5.4pc in afternoon trading to £27.25, but are still higher than their £22 trough in late March.

Diageo said the £1.3bn charge was triggered by particularly tough trading conditions in India, Nigeria and Ethiopia and for its Windsor whisky brand in South Korea. The company has struggled after bars, clubs and restaurants were forced to shut in a swathe of countries fighting the disease.

Despite this declining performance, Diageo pledged to keep its final dividend flat at 42.47p a share. 

Sales dipped in all markets apart from North America, where they climbed 4pc to £163m as strong demand for drinks at home helped offset losses from licensed premises shutting down. On-trade demand usually accounts for a fifth of alcohol sales in North America, with most drinks instead bought at supermarkets and liquor stores.

Markets Hub - Diageo
Markets Hub - Diageo

Diageo boss Ivan Menezes said that tequila continues to become more popular with Americans, with sales of Casamigos up 68pc and Don Julio up 26pc. 

He said: “Spirits are growing faster than beer and wine in the US. That’s been going on for a long time and continues throughout the current lockdown conditions."

Mr Menezes added that customers are increasingly flocking to higher end products.

He said: "If you look at our tequila, which costs about $50 a bottle, it’s up strong double digits. Four out of five drinks in the US are consumed at home... relative to other parts of the world the US is better protected because of the at-home consumption.”

In contrast, sales in South Africa plunged by a quarter after the government twice banned alcohol during the crisis.