Diageo profits drop amid falling demand in Latin America

Drinks giant Diageo revealed a slump in profits over the past half-year as it was particularly weighed down by a plunge in demand in Latin America and the Caribbean.

The Guinness and Gordon’s gin maker saw shares dip in early trading on Tuesday after it revealed some shoppers are shifting towards cheaper drinks.

However, its British business saw positive growth as it was boosted again by soaring demand for Guinness.

The FTSE 100 firm recorded an operating profit of 3.3 billion US dollars (£2.6 billion) for the six months to December 31, down 11.1% against the same period a year earlier.

It came after the group issued a surprise profit warning late last year.

Revenues in the region slid by 23%, or 310 million dollars (£244 million) over the half-year.

It said the drop was caused by weaker consumer demand and high inventory levels in the region.

Elsewhere, Diageo revealed a 10% rise in net sales in Europe, despite declines in Eastern Europe.

The group said it was buoyed by a strong performance in Great Britain and Ireland, where sales rose by 9% and 10% respectively.

It reported continued “strong” sales of Guinness across Britain, with the drink remaining the UK’s most popular pint after knocking Carling off the pedestal last year.

Diageo also reported a 17% jump in sales for Johnnie Walker across Europe during the half-year.

However, recent weakness in gin continued, with volumes of Gordon’s and Tanqueray dropping across the Continent during the period, although this was largely offset through higher pricing.

“While the macro environment will continue to present challenges, I am confident that we remain well-positioned and resilient for the long term.

“We are diversified by category, price point and region and will continue to invest behind our iconic brands to maintain our position as an industry leader in total beverage alcohol, an attractive sector with a long runway for growth.”