By Michael Susin
Diageo PLC reported its first half of fiscal 2023 performance on Thursday. Here’s what we watched:
REPORTED NET SALES: The liquor maker reported net sales of 9.42 billion pounds ($11.68 billion) for the six months ended Dec. 31, beating market expectations of GBP9.22 billion pounds, according to consensus estimate taken from FactSet and based on three analysts’ projections, and above the GBP7.96 billion reported a year ago.
ORGANIC NET SALES GROWTH: Diageo’s organic sales rose 9.4% compared with the same period prior year, according to a company-provided consensus forecast.
OPERATING PROFIT: Organic operating profit rose 15.2% to GBP3.16 billion, beating the company-provided consensus of 7.6% growth from GBP2.74 billion reported a year ago. However, Citi analysts said in a note that operating profit expected to be of GBP3.22 billion, supported by foreign exchange tailwind.
– DIVIDENDS: The board rose its dividend payout to 30.83 pence a share, up from 29.36 pence declared a year ago.
WHAT WE WATCHED:
– NORTH AMERICA TRENDS: Diageo’s 1H performance in the US missed expectations as it reported 3.0% organic sales growth compared with 6.4% consensus. North America is the largest market for the liquor maker–representing more than 50% of its FY 2022 EBIT–and also has the highest margins.
VOLUMES/PRICING: Organic net sales grew 9.4%, with growth in all regions, with price mix reflecting a high single-digit price contribution to net sales growth.
– CONFIDENT AHEAD OF 2H: Diageo said it remains confident in the resilience of the business and in its ability to navigate volatility as it expects the operating environment to remain challenging in the second half.
– BACKED GUIDANCE: Diageo backed its guidance of organic net sales growth in the range of 5% to 7% and organic operating profit growth in the range of 6% to 9% for fiscal 2023 to fiscal 2025.
Write to Michael Susin at [email protected]
