Virus hits sales at Diageo hard

BUT FIRM IS CONFIDENT OF RECOVERY

BY TRICIA PHILLIPS THE world’s largest spirit maker Diageo has warned that the speed of the shutdown of large parts of its market is hitting the business hard.

Sales at the firm, which makes big brands such as Guinness and Johnnie Walker, have fallen 50 per cent across Europe following the closure of bars and restaurants in response to coronavirus.

Production facilities in many countries, including India and its key markets in Africa are closed, while business in mainland China is slowly recovering with the gradual opening of bars and restaurants.

The company has confirmed its interim dividend of 27.41p per share will be paid as scheduled. But it has scrapped its annual forecast for sales and profit growth, and suspended its shareholder returns programme for the rest of the year. In a statement yesterday, it said: “Given the global nature of the Covid-19 pandemic, and the uncertainty around the severity and duration of the impact across multiple markets, we are not in a position to accurately assess the impact of this on our future financial performance.” William Ryder, equity analyst at investment firm Hargreaves Lansdown, says Diageo is likely to have a rough quarter or two, but its brands are strong enough to carry the group to a robust recovery post-virus. He said: “Governments all over the world have closed pubs and restaurants. This has had a predictable impact on Diageo’s sales. Fortunately, Diageo has no problem accessing liquidity, making it unlikely it will come under serious financial strain in the immediate future.”