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Last Updated: Tuesday, 15 November 2005, 16:52 GMT
Diageo warns over hurricane woes
Bottles of Smirnoff Vodka
Diageo is battling a slide in Smirnoff-based drinks
Shares in the world's biggest spirits company Diageo have slipped more than 3% after the group warned the recent US hurricanes could hit profits.

Hurricanes Katrina, Wilma and Rita had badly affected business in south-east America, the Smirnoff vodka maker said.

It added it was "impossible to tell" whether the impact of the storms may be limited to the first half of the year.

Diageo, which is already struggling with weak European sales, said it was hoping orders would pick-up soon.

The terrible hurricanes in the US have had an impact on our performance in the south-eastern states
Nick Rose, Diageo chief financial officer

As a result, it said it expected sales and profits for the current financial year to be in line with those of the previous year.

Diageo had previously forecast that sales would increase by 4% and profits climb by 7%.

Shares in the group were down 26.5 pence, or 3.07%, at 836p by the close in London following the downbeat statement.

Storm concerns

"The terrible hurricanes in the US have had an impact on our performance in the south-eastern states," chief financial officer Nick Rose told investors at a conference in London.

"It is too early to tell whether this will impact full-year performance or whether the impact will be limited to the first half and we will benefit in the second half from restocking."

Mr Rose also warned that increased fuel costs - which were also driven up by the storms - were likely to result in a 20m increase in full year costs.

The company also said that sales of ready-mixed alcoholic drinks in Europe remained disappointing.

"In Diageo Europe, we are seeing continued weakness in ready-to-drink and in Guinness and while we have plans in place to address these trends any benefit is not expected to be seen until later in the financial year," Mr Rose said.

In September, the company reported that pre-tax earnings before exceptional items for the year to June fell 7.5% to 1.82bn ($3.3bn) on sales of 9bn.

During the period, sales of ready-to-drink products based on Smirnoff vodka sank by 25% in continental Europe and 19% in the UK.

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