Sobering financial results from Diageo shows alcoholic earnings under pressure
Invezz
Published Jan 30, 2024 06:53
Updated Jan 30, 2024 07:41
Sobering financial results from Diageo shows alcoholic earnings under pressure
United Kingdom corporation Diageo (LON:DGE) announced its 2024 interim results before markets opened on January 30th.
Diageo (DGE on the FTSE stock exchange in London) is one of the world’s premier brands in the alcoholic drinks space. Well-known names in the space such as Guinness, Smirnoff and Gordon’s all fall under Diageo’s banner, which has been in existence itself for hundreds of years.
Nevertheless, the company announced less-than-intoxicating results, including net sales and volumes that were below expectations. And tellingly, the company opted to report figures in US dollars and euros, as opposed to their customary pounds sterling (GBP).
Profits fall by more than ten percent/h2
Reported net sales for the company dropped to $11.0 billion, a decline of 1.4 percent, while reported operating profit declined 11.1 percent to $3.3 billion, and reported operating profit margin contracted 329 basis points, due to lower organic operating margin and “a negative impact from exceptional operating items.”
Earnings per share (EPC) were also down 17 percent to 98.6 cents, while sales volume was down nine percent to sit at €12.46 billion.
Earning expectations/h2
Prior to the announcement, investors had none-too high hopes, after Diageo announced on November 10th that the upcoming results, operating profits were anticipated to drop by a whopping 20 percent off the back of poor sales in South America and the Caribbean.
Diageo’s preliminary August results /h2
In comparison, its most recent results in August 2023 showed net sales of £17.1 billion, up 10.7 percent, and increased its basic EPS by 17.6 percent to 164.9 pence and pre-exceptional EPS by 7.6 percent to 163.5 pence, while recommending a final dividend of 49.17 pence, up five percent.
However, volume of sales decline 7.4 percent, while organic volume declined 0.8 percent.
Diageo’s annual report results/h2
For the company’s overall 2023 annual report, released some months ago in 2023, Diageo reported that operating profits had risen five percent to £4.63 billion in 2023 versus £4.40 billion in 2022. Similarly, net sales had increased to £17,13 billion in 2023, up 11 percent from 2022.
Can Diageo keep walking? /h2
The year 2023 was difficult for Diageo in more ways than one. In the first half of the year, the brand mourned the loss of its CEO and executive director Ivan Manuel Menezes, who passed away just months before he was due to retire in June 2023.
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Menzes was a legend in the beverage retail space, credited with inventing the slogan for Johnny Walker’s iconic ‘just keep walking’ catchphrase, and the loss clearly hit Diageo hard, who dedicated their entire 2023 annual report to him.
The only constant is change/h2
Nevertheless, it was a transformative year for the brand, growing its ESG muscles, plus selling its Archers brand and acquiring others, like Australia’s Mr. Black.
Diageo also announced in May 2023 that it would be partnering with tech izards IBM (NYSE:IBM) and SAP on an extensive five-year overhaul and revamp of the company’s IT systems. In December 2023, it also introduced its first-ever edition of Distilled, its annual ‘foresight’ report on trends and thought leadership for the alcoholic beverage space in 2024.
This article first appeared on Invezz.com
Written By: Invezz
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