Diageo feels hurricane impact
Drinks giant Diageo conceded today that the devastating hurricanes that buffeted the United States this summer had hurt its performance.
The maker of Johnnie Walker whisky and Smirnoff vodka confirmed business had been lost in the south-eastern states of the US because of hurricanes Katrina, Wilma and Rita.
Weak sales of Guinness in Europe and the ongoing decline in demand for ready-mixed alcoholic drinks have also given bosses a headache since the end of June.
In the US, Diageo is hoping for a glut of orders for its brands over the next six months as retailers and other customers restock their shelves following the storm-related disruption.
Chief financial officer Nick Rose said: “It is too early to tell whether (the hurricanes) will impact full-year performance or whether the impact will be limited to the first half.”
The downbeat statement caused shares in Diageo to fall more than 3% today even though the company left its guidance for the full year to June 30 unchanged.
Diageo predicted in September that the pick-up in volumes during the current financial year should mirror the 3% growth of the past 12 months, with net sales likely to rise by 4%.
The hurricanes have already claimed a casualty in soft drinks firm Cadbury Schweppes after it warned investors that margins were likely to be weaker than expected this year.
Cadbury said the storms had led to a shortfall of trucks when it needed to make deliveries and driven the price of resins used in making bottles higher.
In the update today, Mr Rose said the increase in oil prices to a record level of $70.85 a barrel in the wake of Hurricane Katrina would cost Diageo an additional £20m (€29.7m) this year.
This would be countered by the high operating margins within the business and ongoing efforts to find savings, he added.
Despite its troubles in south-eastern states and recent price increases, Diageo said it was continuing to gain market share across the US as a whole.
