Friday 28 October 2016

Diageo says weaker currencies could cut operating profit by more than €200m

Paul O'Donoghue

Published 23/09/2015 | 07:43

The Guinness Brewery at St James’s Gate in Dublin
The Guinness Brewery at St James’s Gate in Dublin

Irish-listed drinks giant Diageo has said that adverse exchange rates could reduce its operating profit by about £150m (€207m) compared to its 2015 financial year.

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However, it said that stronger volume growth in its 2016 financial year will lead to "improved top line performance".

In a trading update issued ahead of its annual general meeting, Guinness maker Diageo said that the year has started well and performance is "in line with expectations".

It said: "Volume has grown mid-single digit reflecting both improved volume growth trends and comparison against weakness at the start of last year, especially in US spirits.

"We have continued to deliver positive mix but, as we expected, price increases have been muted."

It added: "We continue to believe that stronger volume growth in FY16 will lead to improved top line performance and that we can deliver modest organic margin improvement.

"Our reported results will be impacted by adverse exchange rate movements which at current rates will reduce operating profit for FY16 by approximately £150m against last year.

"As we achieve our productivity gains, from FY17 we expect to deliver mid-single digit organic top line growth on a sustained basis and operating margin expansion of 100 basis points over three years."

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