Diageo plc Q2 FY2025 earnings call

• Positive momentum in first half despite challenging macro environment, with organic net sales growth and market share gains in 65% of measured markets. • Region-specific highlights: North America had slight growth, Europe resilient with Guinness, Asia Pacific impacted by macro issues, LAC back in growth, Africa strong. • U.S. performance: Despite consumer pressure, U.S. Spirits had share gains, Crown Royal and Don Julio performed well, Casamigos turnaround in progress. • Nik's first impressions: Visited multiple regions, committed to strengthening balance sheet and deleverage, highlighted half-year results including organic net sales growth, FCF increase, and dividend. • Half-year highlights: Organic net sales up 1%, gross margin improved, FCF increased by $125 million, dividend of $0.405 declared. • Tariff discussion: Tariffs on U.S. imports from Canada and Mexico add complexity, Diageo has contingency plans. • Reshape priorities: Focus on sustainable top-line growth, operating leverage, and maximizing shareholder returns, including productivity programs, marketing spend rigor, and supply chain optimization.

In the first half of fiscal '25, Diageo showed positive momentum. Organic net sales returned to growth of 1%. Regionally, North America had slight organic net sales growth; Europe had resilient performance with Guinness driving growth; Asia Pacific was negatively impacted by macroeconomic issues; Latin America and Caribbean was back in growth; Africa had strong organic net sales growth. Market share: Held or grew share in 65% of total net sales in measured markets. In categories, Scotch organic net sales declined 5% due to softer industry performance, but gained quality market share. Tequila organic net sales were up 21%, led by Don Julio. Guinness had 17% organic net sales growth, achieving 8th consecutive half of double-digit growth.

• Expect to build on first half momentum for full-year fiscal '25, but tariffs could impact. • Anticipate slight decline in organic operating profit in second half due to higher staff costs and strategic investments. • Removed medium-term guidance of 5%-7% organic net sales growth due to macro uncertainty, will provide near-term updates. • Focus on deleveraging to return to target leverage range of 2.5x to 3x net debt to EBITDA through stronger profit delivery, productivity initiatives, and selective disposals.

• Tariffs on U.S. imports from Canada and Mexico add complexity, impacting input costs for tequila and Canadian whiskey. • Uncertainty around timing and impact of retaliatory tariffs, creating disruption in the short term. • Continued macroeconomic volatility and inflationary pressures affecting consumer sentiment and volume growth.