Coronavirus: Diageo warns of profits hit
Drinks giant Diageo has warned its profits will fall this year, as bars and restaurants in China are forced to close due to the coronavirus outbreak.
The Guinness-owner said operating profits could be £140m-£200m lower than expected due to disruption across Asia.
It joins companies such as Apple and Danone in warning about the impact of the deadly virus. Financial markets have also fallen sharply this week as fears of a pandemic grow.
The company – whose brands include Smirnoff, Johnnie Walker, Tanqueray and Gordon’s gin – also warned on Wednesday that sales could be £225m-£325m lower than expected, depending on how long it took for the outbreak to end.
It said that bars and restaurants in China “have largely been closed and there has been a substantial reduction in banqueting… We have seen significant disruption since the end of January which we expect to last at least into March.
“Thereafter, we expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020.”
Events being postponed in several other Asian countries, especially South Korea, Japan and Thailand, as well as a reduction in conferences and banquets and a drop in tourism have all had an impact on people buying its products.
It added that the coronavirus outbreak had caused a “significant reduction” in people using airports, especially in Asia, hitting travel retail.
China is a very important market for Diageo. In the six months to 31 December, net sales in Greater China, which includes Taiwan, increased 24%.
There was double-digit growth in both Chinese white spirits and Scotch.