Diageo cautions over sales blow from Indian ban on roadside alcohol sales
The firm’s shares fell after it said half-year sales growth would be knocked by the ban in India, as well as the later timing of Chinese New Year.
The group behind Johnnie Walker whisky and Smirnoff vodka has warned over a hit to sales from a ban on alcohol near motorways in India.
Shares in FTSE 100-listed drinks giant Diageo fell 2% after it said half-year sales growth was expected to be knocked by the recent legislation in India, as well as the later timing of Chinese New Year.
India issued a blanket ban on outlets selling alcohol within 500 metres of national and state highways in April.
Diageo’s comments come after rival Pernod Ricard also recently said the Indian ban will impact its half-year sales.
India is Diageo’s largest market in the Asia-Pacific region.
But Ivan Menezes, chief executive of Diageo, said the group was still on track with three-year targets despite the sales blow, including for “mid-single digit” revenue growth.
He said: “Our business continues to strengthen through improved marketing, innovation and commercial execution, and we are well set up to deliver in line with our expectations.”
Diageo recently reported a solid set of full-year figures, thanks in part to a boost from the Brexit-hit pound.
It said in July that operating profit surged 25% to £3.6 billion for the year ending in June, while reported net sales climbed 15% to £12.1 billion.
The group was boosted by healthy growth in international markets and strong scotch sales, while sterling’s weakness laid the foundations for an extra lift when translating overseas earnings back into pounds.
This saw it hike its profit margin growth target, raise the annual dividend by 5% and announce a £1.5 billion share buy-back scheme to be paid out in 2018.