By Karen Peattie

GLOBAL drinks giant Diageo has warned that its operating profits this year could be up to £200 million lower than expected as bars and restaurants across Asia are closed because of the coronavirus outbreak.

The world’s biggest spirits maker warned of a negative impact from the virus – now called Covid-19 – but yesterday estimated the hit on operating profit at £140m-£200m with net sales likely to be £225m-£325m lower than expected, depending on the pace of recovery from the outbreak.

Diageo said that public health measures across affected countries in Asia-Pacific, principally in China, had led to 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.

The owner of Johnnie Walker blended Scotch whisky, Smirnoff vodka, Tanqueray gin and Guinness pointed to the closure of bars and restaurants in Greater China along with a “substantial reduction” in banqueting.

“As the majority of consumption is in the on-trade, we have seen significant disruption since the end of January which we expect to last at least into March,” the company said in a statement. “We expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020.”

Diageo, which sells its products in more than 180 countries around the world, also pointed to Covid-19 in other Asian countries, especially South Korea, Japan and Thailand, where it has led to events being postponed, a reduction in conferences and banquets, and a drop in tourism which have all impacted consumption.

Reduced sales are also expected in the lucrative travel retail market, mainly in the Asia-Pacific region, where the outbreak has caused a significant reduction in international passenger traffic although Diageo said “we expect gradual improvement throughout the fourth quarter of fiscal 2020”.

Diageo’s statement continued: “We remain confident in the growth opportunities in our Greater China and Asia-Pacific business. We will continue to invest behind our brands, ensuring we are strongly positioned for the expected recovery in consumer demand.”

The company joins other big names including Apple and Danone in warning about the impact of Covid-19.

In its interim results announced in January, Diageo reported net sales of £7.2 billion, up 4.2 per cent, for the half-year to December 31, 2019.

As the company tempered its sales outlook it also hailed its Scotch results with its single malt portfolio seeing 17% growth for the half-year to December 31, 2019.

Operating profit increased by 0.5% to £2.4bn as organic growth was offset by unfavourable exchange rates.

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