Previously, the group said that it expected to see gradual improvement in organic net sales growth in the first half of the 2024 fiscal year when compared with the second half of fiscal 2023.
However, due to a weaker performance outlook in Latin America and Caribbean (LAC), where Diageo now projects a decline in organic net sales of more than 20% year-on-year for the first half of fiscal 2024, it has updated its projections.
The announcement, which came on Friday 10 November 2023, led to an 11% decline in its share price on the FTSE 100 during early Friday trading.
Diageo explained that macroeconomic pressures in the Latin America and Caribbean region were causing consumers to cut their alcohol consumption and trade down to cheap alternatives. The group owns a number of popular brands including Johnnie Walker whisky, Guinness stout and Tanqueray gin.
Commenting the update, the company issued a statement which read: “We now expect organic operating profit growth for the first half of fiscal 24 to decline compared to the first half of fiscal 23, primarily due to LAC’s declining net sales, increased trade investment, lower operating leverage and adverse mix resulting from downtrading.
“Across other regions, we expect to continue to invest additional A&P ahead of net sales. We expect that there will be continued, albeit moderating, cost inflation, which will be partially offset by pricing actions.”
Looking ahead to the second half of the 2024 fiscal year, the group said it expects to see “gradual improvement” in organic net sales and operating profit growth when compared with the first half.
The statement added: “We continue to believe in the fundamental strength of our business and expect to deliver organic net sales growth between 5% and 7% over the medium term. We expect operating profit to grow broadly in line with organic net sales growth, while we continue to invest behind our brands.”