Diageo profits plunge as cost cutting target raised – Daily Business

Drinks group Diageo has posted a sharp fall in profit and imposed further cost cutting as the Johnnie Walker to Guinness giant adjusts to a “challenging” market.

Operating profit for the year the end of June fell by 27.8% to $4.34 billion and the company is increasing its cost savings target by $125 million to $625 million over the next three years.

Organic net sales growth is expected to be at a similar level to the last year given a continued challenging market, it said. Growth will be more weighted to the second half, with organic net sales down slightly in the first half.

It said organic operating profit growth is expected to be mid-single-digit, skewed to the second half, and will be supported by cost savings from the Accelerate programme. This also includes the impact of tariffs.

Guinness delivered double-digit growth, and gained share in its three largest markets, while Guinness Microdraught opened new global distribution opportunities. In whisky, Johnnie Walker gained share of international whisky and scotch.

The recommended final dividend for the year is 62.98 cents per share. This will bring the recommended full year dividend to 103.48 cents per share.

Nik Jhangiani, interim chief executive, who was installed on the departure of Debra Crews, said it had been a challenging year, but in line with guidance.

“We delivered 1.7% organic net sales growth reflecting the strength of our portfolio and our diversified footprint. While we are encouraged by areas of progress and the standout performance from Don Julio, Guinness and Crown Royal Blackberry, there is clearly much more to do across our broader portfolio and brands.

“We recognise the need to drive meaningful growth opportunities….and we are sharpening our strategy to accelerate growth.

“Our Accelerate programme is progressing well and is central to creating a more agile operating model. As such, I am pleased to announce that we are increasing our cost savings target by c.$125 million, to c.$625 million over the next three years.

“We are also committed to strengthening our balance sheet and expect to deliver c.$3 billion free cash flow in fiscal 26, increasing financial flexibility whilst continuing to invest for longer term growth.

“While macroeconomic uncertainty and the resulting pressure on consumers continues to weigh on the spirits sector, we believe in the attractive long-term fundamentals of our industry and in our ability to continue to outperform.

“We are focused on what we can manage and control and executing at pace. The board and management are committed to delivering improved financial performance and stronger shareholder returns on a sustained basis.”