Drinks giant Diageo warns it’s on course to take a £200m hit from the coronavirus fallout amid bar and restaurant closures
FTSE 100 listed group’s share price fell over 4% in early morning trading Annual profits and sales expected to take a hit from virus fallout, group warns
The closure of bars and restaurants across Asia triggered by the coronavirus outbreak looks set to hit drinks group Diageo’s profits to the tune of up to £200million.
The company, which is the world’s biggest spirits maker, said cancelled conferences, postponed events, restaurant and bar closures, and a ‘substantial reduction’ in banqueting, had all started to take their toll on its bottom line.
Diageo expects a hit to its net sales of between £225million and £325million for the year, while operating profits could be between £140million to £200million lower than expected.
Financial hit: Drinks giant Diageo has warned that the coronavirus could hit its annual profits by up to £200million
Outbreak: The coronavirus outbreak is affecting people and businesses around the world
The FTSE 100 index continued to fall deeper into the red this morning and Diageo, which is also listed on the blue-chip index, has seen its share price fall by 4.32 per cent or 130.25p to 2,881.75p.
At present, the FTSE 100 is down 1.45 per cent or 101 points to 6,916.
In a stock market statement, Diageo said: ‘Public health measures across impacted countries in Asia Pacific, principally in China, have resulted in: restrictions on public gatherings, the postponement of events and the closure of many hospitality and retail outlets.
‘Several countries and many businesses have also imposed restrictions on travel.
‘It is difficult to predict the duration and extent of any further spread of the COVID-19 outbreak both in and outside of Asia.’
The drinks group said it had seen ‘significant’ disruption since the end of January, which it expects to last until at least March.
But the group is expecting a gradual improvement in sales, returning to normal levels towards the end of its financial year in June.
The group said the outbreak had also triggered a ‘significant reduction’ in international travel, particularly in Asia. This means the number of drinks Diageo sells at transport hubs like airports has been on the slide.
Impact: Trade in London’s Chinatown area has been affected by the coronavirus outbreak
‘Recovery of passenger traffic is assumed to be gradual, resulting in weaker performance for the remainder of fiscal 2020’, Diageo said.
The Asia Pacific region accounted for over 20 per cent of Diageo’s sales last year.
Neil Wilson, chief market analyst at Markets.com, said: ‘The problem is for the likes of Diageo is that once the consumption picks up again in affected regions in China and beyond, you don’t then go and buy two bottles of Scotch instead of your normal one (most people anyway).’
The coronavirus woes come as a further blow to Diageo, which warned over full-year sales last month due to a backdrop of global uncertainty.
It cautioned that full-year sales are expected to be on the lower end of forecasts of between 4 per cent and 6 per cent growth after being affected by volatility in world markets.
Other corporate giants including Apple and Nike have already warned that the coronavirus looks set to hit their bottom lines.
Retail fallout: Other corporate giants including Apple and Nike have already warned that the coronavirus looks set to hit their bottom lines