Diageo 1H25 Earnings & Sales Fall Y/Y, Medium-Term View Withdrawn

Core Insights - Diageo plc reported a decline in pre-exceptional earnings per share by 9.6% year over year to 97.7 cents, attributed to lower contributions from Moët Hennessy and unfavorable currency rates [1] - The company experienced a slight decline in net sales of $10.9 billion, down 0.6% year over year, despite a 1% increase in organic net sales, marking a return to organic sales growth [2][4] Financial Performance - Organic net sales growth was driven by gains in four out of five regions, with North America showing a 0.2% increase, Europe 0.7%, Africa 8.9%, and Latin America and the Caribbean (LAC) 5%, while Asia Pacific saw a decline of 2.6% [4] - Reported operating profit decreased by 4.9% year over year, influenced by lower organic operating profit and negative currency impacts, with the operating margin contracting by 132 basis points [5] - Organic operating profit fell by 1.2% year over year, with the organic operating margin contracting by 69 basis points due to increased overhead investments, offset by lower marketing spending and positive gross margin expansion [6] Cash Flow and Capital Allocation - Diageo generated net cash from operating activities of$ 2.3 billion and reported a strong free cash flow of $1.7 billion, reflecting disciplined working capital management [9] - The company maintained its interim dividend at 40.50 cents per share, indicating strong liquidity and confidence in long-term business health [9] Future Outlook - For fiscal 2025, Diageo expects capital expenditure to be between$ 1.3 billion and $1.5 billion [10] - The company anticipates improved organic net sales growth in the second half of fiscal 2024, although tariffs may impact this momentum, and expects organic operating income to decline slightly in the second half [11]