Drinks giant Diageo has said that it expects US tariffs of 10% on goods exported from the UK and EU will cost the company approximately $150m per year.
In a trading statement, the Guinness and Smirnoff owner said that it expects to mitigate around half of the impact on its operating profit on an ongoing basis due to actions it has already taken.
The group said it would continue to work on measures to further mitigate the cost of tariffs, and announced plans to cut costs by $500m over the next three years for reinvestment and improved operating leverage as it sees to deliver $3bn free cash flow per year from the 2026 financial year.
Diageo also said that it was not affected by tariffs between the US and China. Last week, the White House cut the tariff on most Chinese imports from 145% to 30% -- although products such as smartphones and computers are excluded -- and Beijing reduced the tariff on US goods from 125% to 10%.
Imports to the US are subject to the 10% tariff that came into effect in early April, and so-called reciprocal tariffs announced by US President Donald Trump that month, such as the 20% tax on EU goods, have been paused until July.
During its third quarter, London-based Diageo reported that sales increased 2.9% to $4.4bn as organic growth was partially offset by unfavourable foreign exchange rates and disposals.
Organic net sales were up 5.9%, with organic volume increasing 2.8% and positive price/mix of 3.1%.
The group said that its performance for the quarter was supported by favourable phasing, which it estimated contributed 4% of organic net sales growth, mainly from North America, Latin America and the Caribbean.
North America accounted for sales of $1.9bn, up 5.9% year-on-year, with Europe making up $898m (-1.3%), Asia-Pacific $803m (-0.2%), Latin American and the Caribbean $378m (+12.8%), Africa $369m (-4.1%) and corporate $25m.
Organic net sales of Guinness in Europe grew by a double-digit percentage from the same period last year as the brand saw "continued momentum" from both Guinness Draught and Guinness 0.0.
“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 25," said Debra Crew, CEO of Diageo.
"We also reiterated our organic operating profit outlook for fiscal 25, 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."
(Pic: Getty Images)
