Diageo's finance chief Nik Jhangiani stated on Tuesday that the company could face a potential $200 million reduction in operating profit if U.S. tariffs on Mexico and Canada are enforced in March. Jhangiani mentioned that Diageo has strategies in place to counteract this potential impact.
The leading spirits maker derives approximately 45% of its sales in the United States, its primary market, from products like Don Julio tequila and Crown Royal Canadian whisky that are required to be produced in Mexico or Canada.
Although U.S. President Trump threatened to impose 25% tariffs on both countries, he later postponed these tariffs until March 1. Jhanigani remarked that if the tariffs take effect, Diageo foresees a gross impact on operating profit of roughly $200 million until the end of its financial year on June 30, with plans prepared to alleviate the impact.
CEO Debra Crew stressed that the estimated impact was based on current conditions and did not factor in potential further escalations or retaliations. She added that Diageo is prepared for all possible scenarios.
Diageo executives outlined various measures to lessen the effects of tariffs, including resource re-allocation, supply chain adjustments, pricing modifications, and ongoing communication with the Trump administration.
Regarding inventory management, Diageo has initiated tactics like advancing shipments to countries before duties take effect. Notably, the potential tariffs would affect input costs rather than retail prices.
Due to the uncertainty surrounding tariffs, Diageo refrained from providing detailed projections for its future earnings on Tuesday.