Diageo eyes £625m in cost savings after profits tumble
The London-listed spirits giant said it is seeking to secure £625 million in cost savings, increasing from a previous target of £500 million savings.
Nik Jhangiani, interim boss of the firm, said the savings plan is 'not about job cuts' but added that 'there will be some' as a result. He stressed that the group could still increase its overall workforce.
Diageo said it expects to secure these savings over the next three years from advertising and promotion efficiencies, reduced overheads and supply chain improvements.
The increased savings plans come amid a period of upheaval at the group after the departure of its previous boss last month.
Debra Crew stepped down as chief executive with 'immediate effect' and by 'mutual agreement', following a recent decline in Diageo's share value.
Tariffs, cautious consumer demand and increased cost pressures have weighed down businesses across the drinks industry.
On Tuesday, Diageo reported that net sales dipped 0.1% to 20.2 billion US dollars for the year, although organic sales grew by 1.7%.
It said the drop in net sales was driven by unfavourable currency rates and changes to its brand portfolio.
In Europe, Diageo reported that net sales were up 0.4%, with a 6.7% rise in Great Britain, despite a decline in the volume of sales.
It said stronger sales in Britain were driven by the continued strong demand for Guinness, although this was held back by 'supply constraints' which saw some pubs run short of the Irish stout earlier this year.
The firm revealed that operating profits fell 27.8% to 4.33 billion dollars (£3.3 billion) in the year to June 30.
Mr Jhangiani said: 'While macroeconomic uncertainty and the resulting pressure on consumers continues to weigh on the spirits sector, we believe in the attractive long-term fundamentals of our industry and in our ability to continue to outperform as the TBA (total beverage alcohol) landscape evolves.
'We are focused on what we can manage and control and executing at pace.
'The board and management are committed to delivering improved financial performance and stronger shareholder returns on a sustained basis.'
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