Tariff risk "material" for Europe's beverage makers
STOXX 600 down 0.4%
French stocks underperform on budget worries
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TARIFF RISK "MATERIAL" FOR EUROPE'S BEVERAGE MAKERS
Analysts at Deutsche Bank believe Diageo DGE.L and Campari CPRI.MI are the most exposed European beverage makers to U.S. import tariffs on Mexican and Canadian goods, adding that Remy and Pernod are at risk were tariffs on EU and UK imports to materialise as well.
Trump this week said he plans to impose a tariff of 25% on imports to the U.S. from Canada and Mexico, sending shockwaves through the automotive industry. He's previously said he plans to introduce a 10% tariff on all imported goods.
"Cross border sales represent a material component of sales for our European spirits coverage albeit with a variety of specific geographic exposures," writes Deutsche Bank.
According to DB, data from drinks industry data firm IWSR suggest imports from Mexico account for 26% of Diageo's U.S. sales, with Canada accounting for another 16%. For Campari, Mexican imports account for 24% of U.S. sales.
And while DB says Remy Cointreau's and Pernod Ricard's imports from Mexico and Canada are "immaterial", EU and UK imports are "significant", meaning tariffs on EU and UK imports could be a meaningful headwind.
According to the bank, a 25% tariff on U.S. imports from Canada/Mexico and a 10% on the EU/UK would result in 19% headwind to Remy's EPS, 8% headwind to both Diageo and Campari, 3% headwind to Pernod and 2% headwind to Heineken HEIN.AS.
"We do not believe this level of risk is reflected in company valuations," they add.
"Taken together, we see Remy (HOLD), Diageo (SELL), Campari (BUY) and Pernod (SELL) as most exposed to downside risk from US tariffs."
(Samuel Indyk)
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WEDNESDAY'S OTHER LIVE MARKETS POSTS:
TRUMP VICTORY UNLEASHED 'ANIMAL SPIRITS' U.S. EQUITY INFLOWS - BARCLAYS CLICK HERE
STOXX 600 SLIPS, FRANCE UNDERPERFORMS ON BUDGET WORRIES CLICK HERE
EUROPE BEFORE THE BELL: FUTURES MIXED AFTER FOMC MINUTES, TARIFF THREATS CLICK HERE
TRUMP TARIFF THREATS REVERBERATE IN ASIACLICK HERE
Trump dump https://reut.rs/3CCoHhO
European shares mostly lower, France underperforms https://reut.rs/3V7zUNW
DB beverage impact tariffs https://tmsnrt.rs/3ZqYfRA
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