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TWE and Diageo cut profit guidance as coronavirus evolves

Published:  26 February, 2020

Treasury Wine Estates (TWE) and Diageo have both trimmed their profit guidance for the second time this year as coronavirus continues to evolve.

Diageo said that while the full financial effects of the outbreak were not yet known, “based on current information”, it estimated the negative impact in fiscal 2020 on the group's organic net sales and organic operating profit to be in a range of £225m to £325m and £140m to £200m respectively.

The “timing and pace of recovery” would determine the impact within these estimated ranges, it added.

Meanwhile, TWE said it no longer believed it would achieve the previously provided EBITS growth guidance of between 5% and 10% for fiscal 2020.

"Consumption across discretionary categories in China has been significantly impacted through February, and this impact on consumption is expected to be sustained to at least through March," the company told the ASX.

TWE also said that while the virus may affect performance in other markets outside of China, "at this stage this is not expected to have a material impact".

Diageo said it remained “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,” it added.

The latest profit guidance cuts follow TWE’s announcement in late January that it expected growth in reported EBITS for fiscal 2020 to be between 5% and 10%, down from its earlier guidance of 15% to 20%.

At the same time, Diageo slashed its 2020 expectations in the wake of global volatility linked to coronavirus, saying it expected organic net sales growth to be towards the lower end its 4% to 6% mid-term guidance range for the full year.

“When we released our interim results on 30 January 2020, we commented on the expectation of an impact from the coronavirus outbreak, which we were not able to quantify at the time,” it said today.