Diageo sees brighter outlook after India liquor ban
The world’s biggest spirits maker said its first-half sales growth would be hurt both by the Chinese New Year falling later than in 2017 and a ban on selling alcohol near Indian highways.
Diageo gave the warning in a trading update ahead of its agm, sending its shares down 2% and making them the weakest performer on the FTSE 100 Index.
India’s top court banned liquor outlets within 500 metres of national and state highways in April, in a move that was expected to hit revenue for spirits makers such as Diageo and French rival Pernod Ricard (ERP.PA).
Diageo, however, stood by its target for sales growth in the mid-single digits and an improvement in its organic operating margin of 175 basis points over the three years to June 2019.
“Our expectations on overall performance for the year remain unchanged,” Diageo said in the trading update.
The company said growth in its operating margin this year would also be weighted towards the second half, following increased spending on its US spirits and Scotch whisky business in the first half.
Analysts said it was good that Diageo was investing in its businesses but were disappointed the company had not previously disclosed the shape of the year’s growth would be affected by the Chinese and Indian factors.
Reuters
