20th Feb 2020 09:24
(Alliance News) - The US securities regulator on Thursday announced charges against beer and spirits producer Diageo PLC for failing to make required disclosures relating to the shipments of unneeded products by its North American subsidiary to distributors.
The stock was trading down 0.1% in London in morning trade at 3,136.50 pence a share.
According to a Securities & Exchange Commission order, employees at Diageo North America, the UK company's largest and most profitable subsidiary, "pressured" distributors to buy products in excess of demand in order to meet internal sales targets amid declining market conditions. The resulting increase in shipments enabled Diageo to meet performance targets and to report higher growth in key performance indicators.
The SEC said investors were left with the "misleading" impression that Diageo and its North American unit were able to achieve growth in certain key performance indicators through normal customer demand for Diageo's products.
"Diageo pressured distributors to take more products than they needed, creating a misleading picture of the company's financial results and its ability to meet key performance indicators," said Melissa Hodgman, an associate director in the SEC's division of enforcement.
In turn, FTSE 100-listed Diageo said it is "pleased" to have resolved this legacy matter, which relates back to fiscal years 2014 and 2015, and has agreed to pay USD5 million to settle the action.
"Diageo regularly reviews and refines its policies and procedures and is committed to maintaining a robust and transparent disclosure process," the company said in its statement Thursday.
By Evelina Grecenko; [email protected]
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