Diageo (LON:DGE) reported a steep 35% drop in annual profit on Tuesday, hit by restructuring costs, currency headwinds and weaker margins, but shares rose as results landed slightly ahead of expectations.
The drinks giant said pretax profit for the year to June 30 fell to $3.54 billion from $5.46 billion. The hit was largely due to $1.37 billion in exceptional operating costs and another $220 million in non-operating charges.
Still, net sales were broadly flat at $20.25 billion, just edging out analyst forecasts of $20.20 billion. Organic sales rose 1.7%, while adjusted operating profit slipped 4.1% to $5.70 billion, also ahead of expectations.
Shares in the FTSE 100-listed firm jumped 6.5% by mid-morning in London, as investors welcomed stabilising volumes and signs of improvement in key markets.
Interim CEO Nik Jhangiani, who took over in July following Debra Crew’s abrupt exit, said there were “areas of progress” in the portfolio. Guinness sales were up 14% and Don Julio tequila surged 41%, helping offset declines in Scotch, vodka, rum and gin.
However, overall drinks volume fell 0.2%, although organic volume grew 0.9%. North America and Europe saw declines, while Asia-Pacific, Africa, and Latin America delivered solid growth.
Jhangiani acknowledged the company still has “much more to do” but said the long-term outlook for the spirits industry remains strong despite macroeconomic pressures.
For the year ahead, Diageo expects similar organic sales growth to financial 2025 and mid-single-digit growth in organic operating profit, factoring in current tariffs.
The full-year dividend was held steady at 103.48 cents per share.