Strong pound will slice pounds 60m off profits, warns Guinness

Guinness yesterday became the latest British company to fall victim to the strength of the pound, warning that the recent appreciation of sterling would hit its 1997 profits by pounds 60m. Shares in the Johnnie Walker to Gordon's gin group slipped 5p to 431p, just 1p off their low for the past year.

News of the currency hit followed downgraded forecasts at several other significant exporters including ICI and British Steel. Shares in Rolls- Royce have also been weak as a result of fears that the rising pound would hit profits.

Before yesterday's announcement, part of an otherwise cautiously confident trading statement, analysts had been looking for consensus profits this year of pounds 1.02bn but few now expect the company to breach the pounds 1bn mark. For the year to December 1996 expectations average about pounds 959m, in a year when currency hedging is expected to have resulted in a small pounds 15m positive impact.

The pound's advance began in August last year. From an index low of 84.0 measured against a basket of major currencies, its trade-weighted index shot up to 96.1 by the year-end, a rise of more than 14 per cent.

Yesterday, sterling was trading at 2.66 marks and $1.67. The pound started the new year at $1.712, its highest level since it fell out of the European Exchange Rate Mechanism in late 1992.

Despite currency concerns, Tony Greener, chairman of Guinness, made positive noises about current trading: "I said at the time of our interim results that we are confident the cumulative impact of our focused strategy and increasing investment will deliver long-term growth. I am pleased that our 1996 results will represent steady growth in profit performance, as promised."

The company said trading at United Distillers, the spirits subsidiary, continued to improve. Volumes increased by 1 per cent in 1996 compared with the previous year, with single malts and de luxe Scotch whiskies the best performers. In line with the rest of the industry, Guinness has attempted to stimulate sluggish world-wide demand with increased marketing expenditure, which it said increased by 10 per cent last year, 15 per cent in the second half.

Price increases, the other bugbear of the spirits industry in recent years, remained modest with rises of only 3 per cent in the best markets leading to an overall increase of 1.5 per cent for the division as a whole.

Guinness Brewing, the traditional stout ale core of the group, saw better volume rises with Guinness Stout up by 5 per cent and Draught Guinness 8 per cent higher. Again the increase was acquired through heavy marketing spending, with 10 per cent more put behind advertising stout. The roll- out of Guinness Irish Pubs continued with 1,200 now operating under the marketing umbrella.

Cruzcampo, the Spanish subsidiary where lack of consumer confidence and political uncertainty has held back profits, continued to languish with a further 4 per cent fall in the beer market and a switch from high- margin on-premises sales to lower margin take-home trade.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before