Global drinks titan Diageo has warned profits are expected to take a £45million hit due to currency fluctuations.
The group, responsible for some of the most popular alcoholic drinks in UK pubs, said today there was ‘volatility’ in some of its markets that would hit sales by £175million.
Diageo released the statement ahead of its AGM later today and said trading for the year had ‘started well’ and that performance was still in line with expectations.
Guinness is one of the many brands that the company is responsible for distributing
Despite this, both sales and operating profits are anticipated to struggle due to currency fluctuations.
Ivan Menezes, chief executive, said: ‘In recent weeks, we have experienced some increased emerging market foreign exchange volatility, which has been partially offset by a strengthening of the dollar.
‘Based on current rates we currently expect exchange to have a negative impact on net sales of £175million and a negative impact on operating profit of £45million for the fiscal year’.
However, Mr Menezes wanted to assure investors that the company was in good health.
‘The year has started well and performance is in line with our expectations.
‘We continue to execute our strategy with discipline and agility and despite seeing increased volatility in some markets we continue to expect organic net sales growth in F19 to be broadly in line with last fiscal year and consistent with our medium-term guidance of mid-single digit growth.’
Diageo has taken a profits hit of £45 million after currency fluctuations affected performance
The business is focused on ‘delivering both growth and efficiency’ allowing the company to reinvest in its brands, he added.
The company began a £2 billion share buyback scheme that began in August, meaning the long term outlook remains positive.
Ian Forrest, investment research analyst at The Share Centre, was positive about the future of Diageo and said: ‘While today’s news is slightly disappointing, the market’s calm reaction to it, with the shares falling less than 1% in early trading, is telling and shows that investors are focusing more on the fact that the overall performance remains in line with expectations.
Mr Forrest added that he recommended the shares as a ‘”buy” for investors seeking a lower risk portfolio.’
Shares in the FTSE 100-listed company were only down around 0.4% in morning trading.
Russ Mould, investment director at AJ Bell, said: ‘In order to deliver growth these firms need to take their products to new geographies, but this probably means accepting that some less mature markets will deliver volatile revenue in the short term due to foreign exchange movements and other factors.’
Diageo is best known for drinks brands including Johnnie Walker, Tanqueray gin, Captain Morgan, Baileys, and Crown Royal.
The company’s headquarters are based in London but has offices in six continents.