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Drinks group Diageo has warned that growth in operating profits will slow in the first half on the back of a deepening sales slump in Latin America and the Caribbean, sending its shares down 13 per cent.
In an unscheduled trading update on Friday, the maker of Johnnie Walker, Tanqueray and Guinness said that it expected sales in Latin America and the Caribbean to fall 20 per cent in the first half, squeezing profits for the group.
As a result, Diageo said it predicted “organic operating profit growth for the first half of fiscal 24 to decline compared to the first half of fiscal 23”.
“Macroeconomic pressures have worsened and that caused lower consumption and really more consumer downtrading than what the team was expecting,” said chief executive Debra Crew, addressing the slump in Latin America.
The region accounts for roughly 11 per cent of the value of the group’s sales.
At its last trading update in August, Diageo reported higher than expected inventory levels in Latin America, and sales growth of 20 per cent in the first half of 2023.
Crew said that, as a result, it took longer than expected to clear inventories that were filled when consumer demand was unusually high earlier in the year.
The share price drop left Diageo the biggest faller on the blue-chip FTSE 100 index on Friday.
Rivals including Pernod Ricard, Campari and LVMH’s wine and spirits division have all recently reported declining sales in the last quarter as consumers pushed back against price rises by trading down to cheaper brands or drinking less.
The gloomier outlook comes less than two months after London-listed Diageo told investors that operating profit growth would accelerate in the first half of its current financial year.
The company said it expected an improvement in sales and profit growth in the second half of next year.
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