Diageo plc Q2 FY2021 earnings call

• Returned to top line growth driven by sequential improvement across regions despite COVID-19 challenges.
• Launched Raising the Bar, a $100 million commitment to support hospitality sector recovery, with over 30,000 outlets benefited.
• Launched Society 2030: Spirit of Progress, a 10-year sustainability action plan with 25 goals.
• Focus on portfolio management, strengthening premium-plus brands in fast-growing categories via organic growth and acquisitions (e.g., Aviation American Gin, Chase Distillery).
• Rapidly pivoted to off-trade and e-commerce during COVID, leveraging data and insights for marketing and innovation.
• Embedded everyday efficiency, achieving savings and efficiencies in manufacturing, media investment, and financial controls.

In the first half of fiscal '21, Diageo returned to top line organic growth. North America, the largest and most profitable market, grew 12% compared to the first half of fiscal '20. Europe and Turkey net sales declined 10% due to continued on-trade and Travel Retail impacts. Africa's markets delivered improved performance from the second half of fiscal '20, though recovery pace varied. Latin America and Caribbean had good sequential improvement but with down-trading to lower price products. Asia Pacific saw strong recovery in Greater China and resilience in Australia. Travel Retail remained severely impacted across regions. Revenue contribution: North America is the largest market, tequila now accounts for 7% of net sales up from 1% 5 years ago, etc.

• No specific full-year financial guidance for fiscal '21 due to ongoing COVID-19 uncertainty.
• Anticipate net working capital build in second half as moving back to normalized profile.
• Interim dividend increased by 2% reflecting strong liquidity and confidence in long-term business health.
• Expect continued investment in business to drive sustainable growth, with CapEx expected to increase in second half as projects restart.

• Impact of COVID-19 on on-trade and Travel Retail channels, with recovery being volatile.
• Unfavorable exchange rates significantly impacting net sales and operating profit.
• Economic uncertainty in emerging markets leading to short-term down-trading.

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