Diageo profit boosted by Trump tax reform

Guinness-maker Diageo said Thursday that its net profit jumped by a third during its first half, largely thanks to an exceptional gain following US President Donald Trump’s tax reform.

Diageo, which makes also Smirnoff vodka, Baileys liqueur and Johnnie Walker whisky, posted net profit of £2.1 billion ($3.0 billion, 2.4 billion euros) in the last six months of 2017, the group’s first half.

The British company received a tax credit of $475 million (382 million euros), while Diageo benefitted also from strong sales of Tequila, whisky and gin — the latter spirit enjoying growing popularity in the UK.

Trump meanwhile last month signed into law a sweeping overhaul of the US tax code, boosting company profits by lowering the corporate tax rate to 21 percent from 35.

Diageo meanwhile took a hit from the pound’s rebound against the dollar, a situation set to continue for the remainder of its financial year.

“The exchange rate movement for the year ending 30 June 2018 is estimated to adversely impact net sales by approximately £460 million and operating profit by approximately £60 million,” said the group as it forecasts the cost of converting sales made in dollars.

Diageo’s share price was up 1.0 percent at £25.66 pence in morning deals on London’s benchmark FTSE 100 index, which was slightly higher overall.

“Diageo is delivering pretty much exactly as promised — mid-single digit topline growth with cost savings” and despite a drop in vodka sales, noted Nicholas Hyett, equity analyst at stockbroker Hargreaves Lansdown.