SPIRITS giant Diageo is set to post higher half-year profits and sales as investors wait to learn the impact of US tariffs on its whisky brands.
Scotch whisky exports to the US were hit with a 25% tariff on single malt at the end of last year.
The impact of the tax on Diageo will be revealed when it issues its first-half trading update on Thursday.
“Alcohol has been one of the areas targeted with additional tariffs in recent trade clashes, so investors will be keen to hear Diageo has weathered the storm so far,” said Hargreaves Lansdown equity analyst Nicholas Hyett.
“The group exports Scotch whisky around the world, has invested heavily in Asia, and has been growing its US bourbon business.”
READ MORE: SNP fears over impact of post-Brexit US trade deals on whisky industry
Shareholders will hope that the company’s raft of blended whisky brands, including Johnnie Walker and Buchanan’s, will help to reduce the impact,as these were exempt from October’s new tariffs.
Despite the potential impact of the US government’s taxation, analysts have forecast 4.2% organic net sales growth for the six months to December.
They also expect organic operating profit growth of 4% for the period, rising to 6% by the end of the financial year.
In September, Diageo hailed a “good start” to the financial year but warned investors that it is “not immune” to global trade tensions.
Investors will also be keen to see how drinks trends have been progressing over the six months and whether Diageo’s focus on premium brands is bearing fruit.
Premiumisation has been a key trend in drinks for a number of years, but Fever-Tree’s disappointing festive trading may raise questions over long-term growth.
However, Hyett said Diageo’s “more global and more diversified” business may help to protect it from any slowdown.
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