Diageo said today (10 November) the company expects underlying operating profits to fall in the first half of its financial year amid pressure on its business in Latin America.
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The Johnnie Walker owner sees its organic operating profit declining in the first half of its 2024 financial year.
Diageo pointed to “a materially weaker performance outlook” for its operations in Latin America and the Caribbean, a division that accounted for 11% of its annual net sales in its last fiscal year.
The beer and spirits giant said its new guidance was “primarily due” to lower net sales in the region, plus “increased trade investment, lower operating leverage and adverse mix resulting from downtrading”.
Diageo said its business in Latin America and the Caribbean was “lapping very strong” organic net sales from the first half of its previous financial year, when, by that metric, sales were up 20%.
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By GlobalDataThe Captain Morgan rum owner said “macroeconomic pressures” in the region had led to a decline in consumption and consumers to trade down.
It added: “These impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment. Despite slowing category growth, our business continues to win share in most markets, within the categories we participate in.”
Diageo said it has “momentum continuing” in its four other operating regions.
In North America, the company expects a “gradual improvement” in its organic net sales growth in the first half of fiscal 2024.
Diageo also sees its rate of net sales growth rising in Africa versus in the second half of fiscal 2023.
For Europe and Asia Pacific, the group noted “continued momentum, albeit slower than in the second half of fiscal 23”.
Shares in Diageo were down 11% at 2,888p at 08:39 GMT today.
