Diageo plc Q2 FY2023 earnings call

• Delivered organic top line and operating profit growth above medium-term guidance. • Generated GBP800 million free cash flow, expecting stronger free cash flow in H2. • Gained or held share in 75% of markets. • Strong growth in scotch (19%), tequila (28%), Guinness (17%). • North America organic net sales grew 3%, Europe 10%, Asia Pac 17%, Latin America 20%, Africa 6%. • Increased interim dividend by 5% and announced additional capital return up to GBP500 million in fiscal '23. • Confident in strategy to deliver medium-term guidance.

Diageo reported net sales up 9% with organic top line and operating profit growth above medium-term guidance. Volume grew 2% despite strategic price increases, operating profit up 10%. Organic margin expanded 9 basis points. Free cash flow of GBP800 million generated. Segment performance by region: North America organic net sales grew 3%, Europe 10%, Asia Pac 17%, Latin America 20% (highest margin), Africa 6%. Super Premium Plus brands grew organic net sales by 12%. Scotch up 19%, tequila up 28%, Guinness up 17%.

• Expect stronger free cash flow in the second half as working capital movements normalize. • Anticipate U.S. industry to be in solid mid-single-digit growth in the second half. • Reaffirm medium-term guidance to grow operating profit ahead of net sales on a consistent basis.

• Uncertainties in global markets and potential weakening in certain geographies. • Input cost inflation pressures. • Concerns about consumer spending power and potential down trading in some markets.

Q: Momentum into second half and Ciroc destocking?

A: January started well globally, including Europe, with consumer momentum continuing. Ciroc destocking partially completed, expecting improvement in second half as focus remains on consumer preferences and portfolio strength.