Diageo launches $1bn cost-cutting plan

Diageo, the world's largest premium spirits group and maker of Diageo — Guinness Nigeria, Johnnie Walker, Gordon's gin, and Baileys Irish Cream, announced a major three-year cost-cutting programme under new chief executive David Lewis. The plan targets an additional $1 billion in savings, on top of an existing $650 million programme, by redesigning its operating model and overhauling its supply chain. Around $850 million of savings will come from operations and $150 million from the supply chain. The restructuring will cost approximately $1.2 billion, including $514 million in severance costs. The company reported a 3% decline in net sales to $19.6 billion for the year to June, with operating profit down 27% to $3.2 billion, reflecting $900 million in restructuring charges and a $1.5 billion impairment largely related to Turkey. North America was the biggest challenge, with organic sales down 8.4% and tequila sales down 21%, while Europe grew 5.7% and United Kingdom 6.8% on strong Diageo — Guinness Nigeria demand. Diageo reduced its dividend by more than half and ruled out further acquisitions or major disposals. Shares rose 6-11% on the announcement.