Diageo has lowered its full-year forecast and announced a significant reduction in its interim dividend following a challenging financial period. The company’s new chief executive, Sir Dave Lewis, who took the helm at the beginning of 2024, indicated that the firm faces “significant work ahead” to improve its performance.
For the six months ending December 31, the beverage giant reported a 2.8% decline in underlying operating profits, totaling $3.26 billion (approximately £2.4 billion). Underlying sales mirrored this drop, also falling by 2.8%. As a result of ongoing difficulties in the US market, Diageo revised its full-year sales guidance for the second time in three months, now projecting declines of between 2% and 3%. Earnings are expected to remain flat or see only a low single-digit increase.
In an effort to enhance the company’s financial position, Diageo plans to ramp up cost-saving measures, with expectations that about 50% of these cuts will be realized in the current financial year. The decision to reduce the interim dividend by more than half has drawn the attention of investors, as the company prioritizes financial stability.
Sir Dave Lewis stated, “Only several weeks in, I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth.” He emphasized the necessity of increasing financial flexibility to seize these opportunities.
The board’s resolution to cut the dividend was characterized as a difficult but necessary choice aimed at strengthening Diageo’s balance sheet. “We are confident that this is the right action which will ensure that Diageo can reinforce its position as the leading international spirits business and drive stronger shareholder value over the coming years,” Lewis added.
The company is currently developing an updated strategy, which is set to be unveiled later in the summer. As it navigates these challenges, Diageo’s leadership remains focused on positioning the company for future growth and enhancing its competitive edge in the global market.
