Diageo plans $1bn cost cuts after profit falls 26%

Diageo said Thursday it will cut costs by $1 billion over three years after annual net profit fell 26 percent to $1.74 billion.

The maker of Guinness, Don Julio tequila and Smirnoff vodka said total group sales fell nearly 1 percent to $27.76 billion in the year to June 30.

Diageo said it took a $1.5-billion impairment mostly linked to operations in Turkey, where hyperinflation has affected the business. It also recorded a writedown on its Don Papa rum brand, and said restructuring charges weighed on profit.

Its share price rose 7 percent, putting it at the top of London's FTSE 100, as investors responded to the planned savings.

Chief executive Dave Lewis said the new strategy and a more cost-effective operating model gave the company confidence it could return to consistent value creation for shareholders.

Diageo said weak sales in North America and the Asia Pacific region offset growth in Europe, Latin America, the Caribbean and Africa. Lewis said the company was working to recover competitiveness in North America and deal with the effects of Chinese government policy on white spirits.

The company said its latest performance was also affected by weak North American sales despite businesses stocking up before football World Cup matches held in the United States, Canada and Mexico that ended last month.