Scotch whisky giant launches £375m cutting drive as US tariffs hit
It said it believes its current plans will mitigate around half of the impact of these higher costs on its profit and it will work on further measures to offset the impact.
However, it reflects an improving outlook after Diageo said in February that it was bracing for a 200 million US dollar (£161m) hit to profits from tariffs.
READ MORE: How Donald Trump's tariffs have impacted Scotch whisky – in figures
The firm was set to face a significant knock from proposed tariffs on US imports from Canada and Mexico, but was buoyed by an exemption on alcoholic drinks in March.
Diageo also stressed on Monday that it will not be affected by tariffs between the US and China.
It came as the company launched a 500 million dollar (£375.6m) cost-saving programme, in order to support further investment and improving its leverage.
The London-listed firm, which also makes Guinness, Gordon's gin, and Baileys, said it will shift to 'a more agile global operating model' as it seeks to improve its cash flow.
Meanwhile, the company reported that net sales grew by 2.9% to 4.37 billion dollars (£3.28bn) for the three months to March 31, amid a boost from continued strong Guinness sales.
In Europe, sales dipped 1.3% for the quarter as higher Guinness sales were offset by 'further softness' in spirits across key markets.
Organic spirit sales were weaker year-on-year in the region, despite increased demand for tequila.
However, sales in North America grew by 5.9% amid strong shipments of US spirits.
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said that this was a temporary boost in sales that was explained by people stocking up ahead of Trump's tariffs coming into effect.
'These impacts are estimated to have boosted sales by 4% in the third quarter and are expected to largely reverse in the fourth quarter,' Huggins said.
'Even so, there are some positives for investors to take away from this statement.
'Despite the challenging market backdrop, Diageo has reiterated its full-year guidance. The impact of tariffs appears manageable, for now at least.
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'In addition, Diageo has launched a productivity programme, aimed at boosting cash flow and margins. This should help get profit moving in the right direction, even if tough trading conditions persist.'
Debra Crew, chief executive of Diageo, said: 'In the third quarter we delivered strong organic net sales growth and are on track to deliver on our guidance of sequential improvement in organic net sales performance in the second half of fiscal 2025.
'We also reiterated our organic operating profit outlook for fiscal 2025, including the impact of tariffs based on what we know at this time.
'We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market.
'We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery.'
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