Diageo shares fizz higher on North American growth

FTSE 100 drinks giant Diageo (LON:DGE) saw its share price climb by 3.47% to 2,952p (as of 11:15 GMT) as organic net sales grew by 1% during the six months ended 31st December, driven by a strong performance in North America. Reported sales were down by 4.5% due to unfavourable exchange rates and organic operating profits were down by 3.4% due to channel and category mix changes.

CEO Ivan Menezes commented: “We delivered a strong performance in a challenging operating environment, returning to top line organic sales growth during the half. We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in Travel Retail.

“North America, our largest market, performed particularly strongly and ahead of our expectations. Consumer demand has been resilient and the spirits category continues to gain share of total beverage alcohol. Across other regions we delivered strong sequential improvement compared to the second half of fiscal 20. This reflects improved market share performance through excellent execution in the off-trade channel, and the partial re-opening of the on-trade channel in certain markets.

“Organic operating margin improved compared to the second half of fiscal 20 driven by increased operating leverage and tight control of discretionary expenditure. The decline compared to the first half of fiscal 20 reflected an adverse channel and portfolio mix. We expect margins to improve as the on-trade and Travel Retail recover and with the continued benefit of everyday efficiency“.