Diageo maintains organic sales forecast despite uncertainties in global trade policies

UK – Multinational spirits maker, Diageo said that it expects to meet its full-year organic sales targets, adding that it had a good start to 2020 financial year.

In a trading commentary ahead of the company’s annual general meeting, Diageo chief executive Ivan Menezes said that the company is on track to achieve net sales growth.

However, he warned the company was not immune from “significant changes to global trade policy”.

The company said it continues to expect organic net sales growth to be towards the mid-point of a 4% to 6% range and organic operating profit to grow roughly one percentage point ahead of organic net sales.

The company also said it expects first-half organic operating profit growth to be in-line with or slightly behind organic net sales growth, due to stronger prior year comparables.

“Fiscal 20 has started well as we continue to build on the momentum and consistent progress we are making in the execution of our strategy. Our focus remains on delivering quality sustainable growth,” Menezes said.

“This is supported by a culture of everyday efficiency that enables us to invest smartly in marketing and growth initiatives while expanding margins.

“This is consistent with what we are targeting over the medium-term. Due to a strong prior year comparable, for the first half we expect organic operating profit growth to be in-line with or slightly behind organic net sales growth.

“However, we would not be immune from significant changes to global trade policy and continue to monitor this closely.”

Among the major policies that the London based company could be monitoring include UK’s departure from the European Union.

In the chance of a no-deal exit, it is expected to bring trade tariffs and customs checks with the continent for the first time in decades.

A nod to the proposed trade tariffs President Trump is threatening to slap on EU goods entering the US, including Scotch, as well as the on-going tension between the US and China, could also compound to the trade policy’s that the Johnnie Walker whisky maker is keeping an eye on.

According to a Drink Business report, the US is one of the biggest importers of Scotch, worth around £1.04 billion ($1.15bn), or 22% of the global total, but Diageo Europe, Turkey and India president, John Kennedy, previously said the company was “resilient” enough to overcome any new trade barriers.

Despite uncertainties in the global trade policies, Menezes maintained that the global spirits giant was continuing to make progress against its strategy and build momentum.

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