Diageo cut its full-year guidance and halved the dividend on Wednesday, sending shares sharply lower, after weak trading in North America and China weighed heavily on the drinks giant.<\/p>\n
Posting interim numbers, the owner of Smirnoff, Guinness and Johnnie Walker, among others, said strong sales growth in Europe, Latin America and Africa had been more than offset by a weakening performance in North America. US spirits in particular had been hit by ongoing pressures on disposable income and stiff competition from cheaper alternatives.<\/p>\n
Chinese white spirits also struggled in Asia Pacific.<\/p>\n
Sales in North America – its biggest market – slid 6.8% in the six months to 31 December, while sales in Greater China plunged 42.3%.<\/p>\n
As a result, group net sales shed 4% at $10.5bn during the period. On an organic basis, sales fell 2.8%, driven by a 0.9% decline in organic volumes and a negative price\/mix of 1.9%. Adjusted operating profits before one-off items were 2.8% lower at $3.3bn.<\/p>\n
The dividend was cut to 20 cents a share, from 40.5 cents. Diageo called it a “difficult decision” but insisted the reduction would “accelerate the strengthening of the balance sheet and create more financial flexibility”.<\/p>\n
The blue chip also cut its full-year outlook. It now expects organic net sales to fall by between 2% and 3% this year, primarily due to ongoing weakness in the US. It had previously forecast sales growth of flat to slightly down.<\/p>\n
Organic operating profit growth was forecast to be in the range of flat to low-single digit.<\/p>\n
It also set a minimum floor for the divided of 50 cents per annum. Last year the total dividend was 103.5 cents.<\/p>\n
As at 1230 GMT, the stock had slumped 9% 1,709.63p.<\/p>\n
Diageo has endured a difficult few years, including changing consumer habits, tariffs and an uncertain economic backdrop, which has affected demand for its premium products.<\/p>\n
Wednesday’s results were the first under newly-installed chief executive Dave Lewis, who joined at the start of the year. The former boss of Tesco, who has a long-held reputation for cost cutting, said: “Only several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering, leading to higher growth.<\/p>\n
“To deliver on these opportunities, we need to create more financial flexibility. Accordingly, the board has taken the difficult decision to reduce the dividend to a more appropriate level.<\/p>\n
“We are confident that this is the right action.”<\/p>\n
Dan Coatsworth, head of markets at AJ Bell, said: \u201cMost of the key metrics are in negative territory, with sales, operating profit and cash flow all in decline.<\/p>\n
\u201cShareholders have also been delivered the sucker punch of a big cut to the dividend. That might come as a surprise to many investors, who thought they would be paid to wait for the business recovery.<\/p>\n
“These are awful results, and the repair job is massive.”<\/p>\n","protected":false},"excerpt":{"rendered":"Diageo cut its full-year guidance and halved the dividend on Wednesday, sending shares sharply lower, after weak trading…\n","protected":false},"author":2,"featured_media":58182,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21250],"tags":[23562,23563,23565,23564,23673,24200,4110,22805,21166,3702,28326,28325,10807],"class_list":["post-58181","post","type-post","status-publish","format-standard","has-post-thumbnail","category-diageo","tag-categoryall","tag-categorycompany-news","tag-categoryheadline-news","tag-categorynews-and-announcements","tag-categorysectorial-consumer-non-durables","tag-cuts","tag-diageo","tag-dividend","tag-guidance","tag-shares","tag-slide","tag-tough","tag-trading"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116712501526295319","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/58181","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=58181"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/58181\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/58182"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=58181"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=58181"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=58181"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}