Beverage giant Diageo has reported a 0.6 percent decline in net sales, amounting to US$10.9 billion for the half-year ended December 31, 2024.
The drop is attributed to unfavorable foreign exchange rates, despite an increase in organic net sales.
The company’s profit before tax decreased by 1.2 percent to US$2.8 billion, down from US$3.3 billion in the same period last year.
Organic operating margins fell by 69 basis points, mainly due to increased overhead investments. However, this was partially offset by reduced marketing expenditures and gross margin expansion.
Reported net sales also saw a 3 percent decline, impacted by adverse currency exchange fluctuations and a route-to-market reclassification. Nevertheless, organic net sales remained strong, helping mitigate the overall decline.
Regional Performance
In Europe, reported net sales rose by 3 percent, driven by a hyperinflation adjustment in Türkiye, a business transfer from the Asia Pacific region, and organic growth.
The spirits segment experienced a 3 percent decline, while beer revenues surged by 13 percent, led by Guinness. Sales of Guinness 0.0, the non-alcoholic variant, nearly doubled.
CEO Debra Crew acknowledged the challenge of meeting demand but assured stakeholders that beer production would increase, citing the new brewery in County Kildare, Ireland.
Diageo Africa achieved high single-digit growth, supported by volume expansion and strategic pricing, despite macroeconomic challenges.
During the first half of fiscal year 2025, Diageo completed the sale of its majority stake in Guinness Nigeria PLC. Additionally, on January 28, 2025, the company announced an agreement to sell its stake in Guinness Ghana Breweries PLC.
The Africa region is now organized into two strategic markets: East Africa and SWC Africa, consolidating previously separate markets such as Nigeria, Africa Regional Markets, and South Africa.
Tariff Uncertainty and Growth Target Withdrawal
Diageo has withdrawn its annual sales growth target of 5-7 percent, citing market uncertainties, including potential U.S. tariffs and weak demand in key markets.
On Monday, U.S. President Donald Trump temporarily delayed the imposition of 25 percent tariffs on imports from Mexico and Canada, granting a 30-day reprieve. However, concerns remain over future trade policy decisions.
Chief Financial Officer Nik Jhangiani estimated that if the proposed tariffs are implemented in March, they could result in a US$200 million impact on operating profit for the fiscal year ending June 2025.
