Proactive Investors - Diageo PLC (LON:DGE) has warned of slower growth in the second half of this year after a “materially” weaker sales performance in Latin America and the Caribbean.
The spirits manufacturer said organic sales in Latin America and Caribbean (LAC), which represent nearly 11% of Diageo's net sales value, are now expected to decline by more than 20% year on year in the first half of financial year 2024.
“We have momentum continuing in four of our five regions, however at the group level, in the first half of fiscal 24, we now expect to see slower growth than the second half of fiscal 23,” Diageo said in a statement.
The company now expects organic operating profit growth for the first half of financial 2024 to decline compared to the first half of 2023, primarily due to LAC's declining net sales, increased trade investment, lower operating leverage and adverse mix resulting from downtrading.
Across other regions, it expects to continue to invest additional advertising and sales spend ahead of net sales.
In North America, the firm expects gradual improvement in organic net sales growth in the first half of financial 2024 compared to the second half of 2023, while maintaining distributor inventory in line with historical levels.
In Europe and Asia Pacific, it sees continued momentum, albeit slower than in the second half of financial 2023.
It expects that there will be continued, albeit moderating, cost inflation, which will be partially offset by pricing actions.
Looking ahead to the second half of 2024, Diageo forecasts a gradual improvement in organic net sales and organic operating profit growth from the first half and will continue to invest in marketing, and in the business, to drive long-term sustainable growth.
Diageo said it continues to believe in the fundamental strength of the business and expects to deliver organic net sales growth between 5 and 7% over the medium term.