Alcohol Giant Diageo Suspends Medium-Term Guidance As Trump's Tariff Looms

Alcoholic beverage company Diageo Plc DEO released first-half FY25 earnings results and suspended medium-term guidance.

The company reported net sales of $10.9 billion for the half year ended December 2024, reflecting a slight decline of 0.6% primarily driven by unfavorable foreign exchange fluctuations.

Despite the decrease, organic net sales showed a positive growth of 1.0%, bolstered by favorable price/mix changes. However, volume experienced a slight dip of 0.2%.

The company’s operating profit also decreased by 4.9%, with its operating profit margin shrinking by 132 basis points, impacted by currency movements and lower organic operating margins.

Despite this, Diageo managed to maintain or grow market share in 65% of total net sales value in measured markets, including the U.S.

Moët Hennessy’s significantly lower contribution and unfavorable currency exchange rates were the primary reasons behind a 9.6% drop in pre-exceptional earnings per share, which fell to 97.7 cents.

On the other hand, the company saw an increase in net cash flow, rising by $0.2 billion to reach $2.3 billion, with free cash flow rising to $1.7 billion, an increase of $0.1 billion compared to last year.

Given ongoing uncertainty in both the geopolitical and macroeconomic landscapes across key markets, Diageo has decided to withdraw its medium-term guidance.

Instead, the company has committed to providing more frequent near-term updates on its performance.

Also Read: Why Beer, Tequila, Avocados, Cars, iPhone Prices Could Rise: Trump’s Tariffs On Canada, Mexico, China To Hurt Several Sectors

“Diageo has anticipated and planned for a number of potential scenarios regarding tariffs in recent months. The confirmation at the weekend of the implementation of tariffs in the US, whilst anticipated, could very well impact this building momentum,” said CEO Debra Crew.

“It also adds further complexity in our ability to provide updated forward guidance given this is a new and dynamic situation. We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause, and we will also continue to engage with the US administration on the broader impact that this will have on everyone supporting the US hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets.”

Diageo declared an interim dividend of 40.5 cents. The company’s leverage ratio stood at 3.1x net debt to EBITDA as of December 2024.

Price Action: DEO shares are trading lower by 0.06% at $116.86 in premarket at the last check Tuesday.

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