The Courier & Advertiser (Fife Edition)
Diageo flags potential hit from currency exchange volatility
Group facing a £45m downside to operating profits
Drinks giant Diageo braced investors for a £45-million full-year hit to operating profits as it flagged increased currency exchange volatility.
The FTSE 100 group’s chief executive, Ivan Menezes, said the year had started well for the business but warned that current exchange rates meant the business was facing a downside to anticipated operating profits.
“In recent weeks we have experienced some increased emerging market foreign exchange volatility, which has been partially offset by a strengthening of the dollar,” Mr Menezes said in an update ahead of the group’s AGM in London.
“Based on current rates, we currently expect exchange to have a negative impact on net sales of £175m and a negative impact on operating profit of £45m for the fiscal year.”
However, Mr Menezes said the group was “broadly” on track to meet its financial targets for 2018/19.
“The year has started well and performance is in line with our expectations,” he added.
“We continue to execute our strategy with discipline and agility and despite seeing increased volatility in some markets, we continue to expect organic net sales growth in F19 to be broadly in line with last fiscal year and consistent with our medium-term guidance of mid-single digit growth.”
He added that the business was focused on “delivering both growth and efficiency” allowing the company to reinvest in its portfolio of brands which including flagship lines such as Johnnie Walker, Smirnoff, Guinness and Tanqueray gin.
The group has more than 3,000 staff across Scotland, with more than 1,000 based at its facilities at Cameronbridge, Leven and Cluny Bond in Fife.
On Wednesday, the GMB union said its Scottish members had rejected a pay deal by Diageo and urged the company to come back with a revised offer.
Diageo offered a 3.2% equivalent pay rise to Scottish workers – which also includes Unite union members – but said it had agreed to further talks with the GMB next week.
The group’s stock closed up 41p at 2,654p last night.