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Diageo tops up dividend 5% but more volatility expected in Asia Pacific, Africa and Latin America

Sales increased 8.3% on the previous year, led by a strong performance in North America

Diageo PLC -
The Casamigos tequila brand grew sales 126%

Diageo PLC (LSE:DGE), the maker of Smirnoff vodka and Guinness stout, reported organic net sales growth across all regions over the past year but warned it expects volatility in some markets in the coming months.

Chief executive Ivan Menezes said the group expects organic net sales momentum to continue into the new financial year.

“We believe we are well positioned to continue to benefit from resilience in the off-trade and recovery in the on-trade. However, we expect near-term volatility to remain, including the potential impact of any future waves of Covid-19, and for disruption in travel retail to continue.”

The FTSE 100 giant topped up its final dividend by 5% to 44.59 pence per share after increasing free cash flow by £1.4bn to £3bn.

Net sales came in at £12.7bn for the 12 months to end-June, up 8.3% on the previous year, led by a strong performance in North America. Sales there rose 20% with help from restocking trends and strong growth in tequila brands Casamigos and Don Julio.

Operating profits surged 75% to £3.7bn.

In North America, Menezes expects momentum to continue, with market growth returning towards historical levels of mid-single digits as off-trade consumption growth slows.

Stronger growth is expected in Europe and Turkey as on-trade restrictions continue to ease, particularly benefitting Guinness.

Volatility in Africa, Latin America and Caribbean and Asia Pacific is predicted to persist.

Overall, Menezes expects operating profit margins to benefit from a further recovery in sales volumes, positive channel mix and ‘premiumisation’ trends.

With inflation hitting other consumer brands, he said, “we believe our focus on everyday efficiency and revenue growth management will help to mitigate against rising inflationary pressures.”

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Price: 3490.5 GBX

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