Maker of Guinness, Smirnoff cuts costs over U.S. tariff hit

Pints of Guinness sit on the bar during the official world launch of the company's new look Wednesday Oct. 26, 2005 in Toronto. (CP PHOTO/Adrian Wyld) (ADRIAN WYLD/Canadian Press)

LONDON, United Kingdom — Diageo, the maker of Guinness stout and Smirnoff vodka, said Monday it would cut costs to reduce debt, as the British group anticipates a hit from U.S. tariffs of $150 million.

The announcements from Diageo, whose brands also include Johnnie Walker whisky and Baileys liqueur, were included in an earnings statement that showed total group sales rose nearly three percent to around $4.38 billion in its third quarter.

“We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery,” Diageo chief executive Debra Crew said in the statement.

The maker of Astral tequila and Captain Morgan rum said it plans cost savings of around $500 million over three years under the first phase of its Accelerate program.

It leaves the company “well-positioned to deliver sustainable, consistent performance while maximizing shareholder returns; even if current trading conditions persist”, Crew added.

The CEO said Diageo would share further detail of Accelerate in its full-year results due in August.

Diageo’s share price was steady Monday on London’s benchmark FTSE 100 index, which was down 0.6 per cent overall in late morning deals following the updates.

While “tariffs are likely to cause an annualized hit of some $150 million on profits... the group estimates that its mitigating actions, such as increasing prices, cost control and supply chain management will limit the damage”, noted Richard Hunter, head of markets at Interactive Investor.