Diageo plc Q2 FY2024 earnings call

• LAC Inventory Issue: Experienced inventory buildup during the COVID super cycle; actions taken include expanding sell-out data coverage, incentivizing distributors to report sell-out info, improving sales and operations planning processes, and testing RFID tech in Mexico. - Regional Performances: NAM: Actions beginning to show impact, with Crown Royal and other whiskey brands gaining share. Europe: Guinness and scotch growth. APAC: Greater China and India growth. Africa: Beer growth. - Category Highlights: Scotch: Winning share in measured markets. Tequila: Global rollout beyond LAC and NAM. Guinness: Strong growth, including Guinness 0.0. - ESG: Review of 2030 Spirit of Progress plan, simplifying to focus on positive drinking and water, and pivoting to low carbon with a focus on triple wins. - Productivity: Unlocked $335M in productivity savings, on track to exceed $1.5B three-year target, and committed to $2B over the next three years.

Latin American Region (LAC): Organic net sales declined 23.5% in the first half. LAC drives nearly 25% of Diageo's scotch organic net sales value. North America (NAM): Organic net sales were down 2%, but there was sequential improvement; U.S. spirits depletion growth rate was nearly 1 percentage point ahead of shipments. Europe: Organic net sales grew 3%, primarily driven by Guinness (24% growth, including Guinness 0.0 more than doubling) and scotch (5% growth, led by Johnnie Walker at 15%). Asia Pacific: Maintained good momentum, with Greater China growing 18% and India achieving 9% organic net sales growth. Africa: Beer performed strongly, with Malta Guinness, Senator, and Guinness each delivering double-digit growth. Categories: Scotch: ~2/3 of the 10% decline in scotch organic net sales value in the half was attributable to LAC. Tequila: Global rollout outside LAC and NAM saw net sales more than double, with Europe up over 80% and APAC up 13%. Guinness: Organic net sales grew 14%, with Guinness 0.0 more than doubling.

• Second half of fiscal '24: Expect organic net sales growth to gradually improve; organic operating profit decline rate to improve compared to the first half. - Medium-term: Fiscal '25 expected to have organic net sales growth trajectory improving, with organic operating profit growth broadly in line with net sales growth. - LAC: Second half expected to see a 10%-20% organic net sales decline versus the prior year.

• Inventory issues in LAC could persist if not managed properly. - Macroeconomic challenges in regions like Africa. - Intensified price competition in the U.S. impacting market share. - Foreign exchange fluctuations affecting net sales and operating profit.