The Press and Journal (Aberdeen and Aberdeenshire)
‘Year of two halves’ for global drinks producer
Covid-19: Diageo chief executive said pandemic has presented ‘challenges’
Global drinks giant Diageo yesterday pointed to a “year of two halves” as it released results showing a 47% dive in operating profits amid Covid-19 bar and restaurant closures and travel restrictions.
Ivan Menezes, chief executive of the world’s biggest whisky producer, said the pandemic had presented “significant challenges”, following a “good, consistent performance” in the first half of its financial year.
But he added the company was “well-placed to emerge stronger” after
“We are now a more agile, efficient and effective business”
taking “decisive action” to reduce spending.
Diageo’s interim results, for the 12 months to the end of June, showed operating profits almost halved compared to the previous year at £2.1 billion.
Total sales at the firm, which includes Johnnie Walker, J&B and a number of single malts, as well as Guinness, among its brand portfolio, fell by 9% to £11.8bn, despite growth in North America.
The company was also hit by a £1.3bn write-down across its operations in Nigeria, Ethiopia and Korea.
Mr Menezes said: “Fiscal 20 was a year of two halves – after good, consistent performance in the first half... the outbreak of Covid-19 presented significant challenges for our business, impacting the full year performance.
“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.”
He continued: “We have taken decisive action through the second half of fiscal 20, tightly managing our costs, reducing discretionary expenditure and reallocating resources.
“We are further enhancing our data analytics and technology tools to rapidly respond to local consumer and customer shifts triggered by the pandemic.
“We have strengthened liquidity, giving us flexibility to continue to invest effectively in the business for the long term.
“While the trajectory of the recovery is uncertain, with volatility expected to continue into fiscal 21, I am confident in our strategy, the resilience of our business and am very proud of the way our people have responded. We are well positioned to emerge stronger.”
Ewan Andrew, Diageo’s Scotland-based president of global supply chain and procurement, said the company was working hard on both sides of the Atlantic to “de-escalate” a trade dispute between the US and the EU that has seen punitive tariffs slapped on imports of single malts and other goods to the US.
The US is considering extending the 25% duty hike to blended whiskies and other spirits in the continuing spat over EU subsidies for plane manufacturer, Airbus.
Mr Andrew said: “Diageo has a broad range of products in the US and we will manage through, but what we are really focused on is that this needs to de-escalate and everyone needs to work together to do that.”