Diageo has delivered strong cash generation and said it is well positioned for future growth despite challenging first half environment.
It reported that net sales of $11.0 billion declined 1.4% or $158 million, due to a $167 million unfavourable foreign exchange impact and an organic net sales decline of $67 million or 0.6%, driven by a $310 million or 23% decline in Latin America and Caribbean (LAC).
Commenting on the figures Debra Crew, chief executive, said: “The first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year and faced an uneven global consumer environment. Excluding LAC, our group organic net sales grew 2.5%, driven by good growth in Europe, Asia Pacific and Africa.
“While North America delivered sequential improvement in line with our expectations, we are focused on returning to high-quality share growth as consumer behaviour continues to normalise in our largest region. As previously announced in November 2023, materially weaker performance in LAC, driven by fast-changing consumer sentiment and high inventory levels, significantly impacted total business performance.
“Having conducted a review of inventory levels and monitored performance in the critical holiday season, we have taken action and have further plans to reduce inventory to more appropriate levels for the current consumer environment in the region by the end of fiscal 24.
“This is a key priority. With a strong focus on execution, we delivered an improved free cash flow of $1.5 billion, and our pipeline of productivity initiatives in the first half of fiscal 24 drove $335 million of savings, helping us to sustain investment in brand building.
“During the half, we returned $0.5 billion to shareholders via share buybacks as part of our commitment to return up to $1.0 billion of capital to shareholders in fiscal 24. We declared an interim dividend increase to 40.50 cents per share, reflecting our commitment to a progressive dividend policy.
“Looking ahead to the second half of fiscal 24, despite continued global economic volatility, we expect to deliver improvement in organic net sales and organic operating profit growth at the group level, compared to the first half.
“While the macro environment will continue to present challenges, I am confident that we remain well-positioned and resilient for the long term. We are diversified by category, price point and region and will continue to invest behind our iconic brands to maintain our position as an industry leader in total beverage alcohol, an attractive sector with a long runway for growth.”
