Diageo says Indian highway liquor ban to hurt sales

REUTERS - Diageo, the maker of Johnnie Walker whiskey and Smirnoff vodka, expects its first-half sales growth to suffer from the timing of Chinese New Year and a ban on selling alcohol near Indian highways, the British company said on Wednesday.

India's top court banned liquor outlets within 500 metres of national and state highways in April, in a move that was expected to hit revenue for liquor makers such as Diageo, the world's biggest, and French rival Pernod Ricard.

Shares in Diageo were down 1.9 percent at 0750 GMT following Wednesday's trading update ahead its shareholder meeting, making them the top faller on FTSE 100 index.

"Given that both of these were known about at the time of the full-year results back in July we wonder why it wasn't pointed out then," RBC Capital Markets wrote in a note.

Pernod, which makes Mumm champagne and Absolut vodka, had warned that the Indian ban would hurt sales in the first half of its 2017-18 fiscal year but did not quantify the likely impact.

Diageo's net sales in India, its largest market in the Asia-Pacific region, rose 2 percent in its last financial year, driven by the popularity of its whiskeys.

Despite its concerns about Indian sales and Chinese New Year, Diageo stood by its target for sales growth in the mid single digits and an improvement in its organic operating margin of 175 basis points over the three years to June 2019.

"Our expectations on overall performance for the year remain unchanged," Diageo said.

(Reporting by Rahul B in Bengaluru; editing by David Clarke)