Drinks Giant Diageo warned that it expects U.S. trade tariffs to lose about $150 million (£113 million) annually as it launches a major cost-cutting program.
Guinness and Johnnie Walker manufacturers say tariffs on UK and Europe will be affected by 10% tariffs and European imports after Donald Trump launched a series of tariffs last month.
It said it believes its current plans will mitigate half of the impact of these higher costs on profits and will take further steps to offset the impact.
However, this reflects Diageo said in February that its outlook has increased, a blow to profits worth $200 million (£161 million) which is a blow to the profits of the tariffs.
The company will face proposed tariffs for imports from Canada and Mexico, but was encouraged by exemptions from alcoholic beverages in March.
Diageo also stressed on Monday that it will not be affected by tariffs between the United States and China.
The company launched a $500 million (£375.6 million) cost-saving program to support further investment and improve its leverage.
The London-listed company also made Gordon's Gin and Baileys say it will turn to a “more agile global operation model” as it tries to improve its cash flow.
Diageo employs about 30,000 people, but has no comment on whether it will be affected by cost cuts.
Meanwhile, the company reported net sales rose 2.9% to $4.37 billion (£3.28 billion) in the three months ended March 31, an increase due to continued strong Guinness sales.
In Europe, sales fell 1.3% in the quarter as Guinness's sales increasingly offset the “further softening” in major markets.
Despite the increasing demand for tequila, the sales of organic spirits in the region are also relatively weak.
However, North American sales rose 5.9% due to strong shipments of US spirit currencies.
“In the third quarter, we provided strong organic net sales growth and are expected to provide improved guidance on the order of organic net sales performance in the second half of fiscal 2025,” said Debra Crew, CEO of Diageo.
“We also reiterate the organic operating profit outlook for fiscal 2025, including based on the impact of the tariffs currently known.
“We continue to believe in the attractive long-term basics of the industry and the ability to surpass the market.
“We believe that the recent industry pressure is largely driven by the macro economy, and the ongoing uncertainty has affected the timing and pace of recovery.”
Russ Mold, investment director at AJ Bell, said: “Investors are prepared for a bad quarter of Diageo, but the beverage giant manages to pull a rabbit out of the hat.
“Sales are driven by a mix of quantity and price, and diageo benefits from wholesaler approval.”
