Diageo H1 Growth Likely To Be Impacted By China, India

Spirits giant Diageo thinks its sales will be hit by a ban on the sale of alcohol near highways in India

Spirits giant Diageo thinks its sales will be hit by a ban on the sale of alcohol near highways in India

In a brief statement ahead of the FTSE 100 firm's AGM, Ivan Menezes, chief executive of the maker of Johnnie Walker whisky and Smirnoff vodka said: "We expect the H1 organic net sales growth rate will be impacted by the later timing of Chinese New Year and by the expected impact of the highway ban in India".

Diageo led the FTSE 100 fallers this morning after its shares dropped nearly two per cent following a trading update.

India issued a blanket ban on outlets selling alcohol within 500 metres of national and state highways in April.

The Johnnie Walker maker has weighted its investment in USA spirits and Scotch, and expects to grow its organic operating margin in the second half of the year as a result, according to a statement released ahead of Diageo's AGM. "We re-affirm our expectation of mid-single digit top line growth and 175bps of organic operating margin improvement over the three years ending 30 June 2019".

Diageo's comments come after rival Pernod Ricard also recently said the Indian ban will impact its half-year sales.

"Given that both of these were known about at the time of the full-year results back in July we wonder why it wasn't pointed out then", RBC Capital Markets wrote in a note, as quoted by the newswire.

The Asia Pacific region made up roughly 16pc of sales in Diageo's last financial year so a drop in sales in India could have a visible effect on the company's top line.

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