Drinks giant Diageo has revealed it faces a £112milion per year financial hit due to tariffs imposed by US President Donald Trump.
In an update to shareholders this morning, the owner of Guinness, Smirnoff and Jonnie Walker said restrictions to the US market would impact its profits.
The update came as the group reported a 2.9% increase in net sales to $4.4 billion in the third quarter, with unchanged guidance for the year.
The firm said: "Assuming the current 10% tariff remains on both UK and European imports into the US, that Mexican and Canadian spirits imports into the US remain exempt under USMCA, and that there are no other changes to tariffs, the unmitigated impact of these tariffs is estimated to be c.$150million (£112.6m) on an annualised basis.
"Tariffs between the US and China do not have a material impact on our business. We expect that given the actions that we have in place already, before any pricing, we will be able to mitigate around half of this impact on operating profit on an ongoing basis. Looking ahead, we will continue to work on measures to mitigate this impact further.
"Our long track record of managing international tariffs gives us confidence in our ability to navigate this successfully."
The firm has also launched a launched a $500million (£375m) cost-savings programme today, named 'Accelerate'.
Debra Crew, Chief Executive, added: "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.
"Consistent with our strategic priorities and our focus on what we can manage and control, we are introducing the first phase of our Accelerate programme. This sets out clear near-term cash delivery targets and a disciplined approach to operational excellence and cost efficiency.
"It will strengthen Diageo by increasing our effectiveness, agility, and resilience. It will also ensure that we are well-positioned to deliver sustainable, consistent performance while maximising shareholder returns; even if current trading conditions persist."
FTSE 100
The UK's flagship share index, the FTSE 100, was down 38-points at 8,647 shortly after opening this morning.
Brent crude oil futures were down 0.51% at $64.90 a barrel.
Companies reporting today
- Big Yellow Group - Full Year Results
- Diageo - Q3 Trading Statement
- Kainos group - Full Year Results