Diageo profits almost halve on back of pandemic

Scotland’s largest whisky producer Diageo has seen its profits almost halve after it was hammered by the closure of pubs and bars in the face of the coronavirus pandemic.

The group's portfolio includes Islay's Lagavulin single malt. Picture: contributed.

The group – whose brands include Guinness, Johnnie Walker and Lagavulin, revealed that operating profits dived 47 per cent to £2.1 billion in the year to 30 June, as it was also hit by a £1.3bn write-down across its operations in India, Nigeria, Ethiopia and Korea. Total sales fell by 9 per cent to £11.8 billion for the year despite being boosted by growth in sales in North America.

Kathy Mikells, chief finance officer of the company, said sales in the US were "resilient" as shoppers continued to buy tequila and other spirits to drink at home. She said: "It was a year of two distinct halves due to Covid-19. But we did see improvements continue through the fourth quarter, with sales moving higher in April, May and June, so we are confident in our current position."

The company said European drinkers have recently turned increasingly to rum, which saw sales jump by 3 per cent, on the back of strong sales for Captain Morgan.

Ivan Menezes, chief executive of the company, said: "Through these challenging times we have acted quickly to protect our people and our business, and to support our customers, partners and communities.

"The actions we have taken to strengthen Diageo over the last six years provide a solid foundation to respond to the impacts of the pandemic. We are now a more agile, efficient and effective business."William Ryder, equity analyst at Hargreaves Lansdown, said: "Diageo is still a great business, still owns some terrific brands and whisky is still a very difficult market for newcomers to break into.

"The hit to earnings should be short-lived provided the global economy doesn't take too long to recover. We think the group will continue to do well long term, but management will have to focus more on debt reduction than they probably would have liked."

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