19th May 2025 08:32
(Alliance News) - Diageo PLC on Monday reported third-quarter sales growth and reaffirmed its full-year guidance, while unveiling the first phase of a new operating strategy focused on boosting cash generation and streamlining costs.
The London-based drinks maker, owner of Johnnie Walker whisky and Guinness stout, said reported net sales in the three months to March 31 rose 2.9% year-on-year to USD4.38 billion from USD4.25 billion.
On an organic basis, net sales grew 5.9%, with a 2.8% rise in volume and 3.1% improvement in price/mix.
Growth was strongest in Latin America and the Caribbean, where organic net sales jumped 29%, and in Africa, which rose 10%. North America posted a 6.2% organic increase, while Asia Pacific grew 1.6%. Europe, however, saw a slight organic decline of 0.4%.
Diageo said favourable shipment timing contributed around four percentage points to group organic growth, particularly in North America. This is expected to reverse in the fourth quarter.
For the nine months to March 31, reported net sales rose 0.4% year-on-year to USD15.28 billion, with organic growth of 2.4%.
Chief Executive Debra Crew said: "We delivered strong organic net sales growth and are on track to deliver on our guidance of sequential improvement in the second half of financial 2025.
"We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market. We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery."
The Don Julio tequila maker reiterated its guidance for financial 2025, maintaining expectations for mid-single-digit organic net sales growth, following a 0.6% decline in financial 2024, supported by an anticipated improvement in performance during the second half of the year.
The company also continues to forecast a slight decline in organic operating profit. In financial 2024, organic operating profit fell 4.8% to USD304 million. This outlook incorporates the expected impact of recently imposed US tariffs.
Diageo estimates the unmitigated effect of the 10% US tariff on UK and European spirits at around USD150 million annually but believes it can offset roughly half of that through existing measures. The company said its financial 2025 guidance includes these projected impacts, with further mitigation efforts ongoing.
On Monday, Diageo also unveiled the first phase of its 'Accelerate' programme – a strategy designed to enhance agility, efficiency, and financial performance.
The programme targets sustainable annual free cash flow of around USD3 billion from financial 2026, supported by a USD500 million cost savings initiative. Diageo expects this will enable both reinvestment and improved operating leverage. It aims to return to within its leverage range of 2.5x to 3.0x net debt to earnings before interest, tax, depreciation, and amortisation by financial 2028.
Looking ahead, Diageo continues to expect a sequential improvement in organic net sales growth in the second half of fiscal 2025 compared to the first. Full-year results will be published on August 5.
Shares in Diageo opened up 2.4% at 2,204.00 pence in London on Monday.
By Eva Castanedo, Alliance News reporter
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