Diageo Issues Q3 Sales Data & Other Updates, Organic Sales Rise 5.9%

Core Insights - Diageo plc reported net sales of $4.4 billion for Q3 fiscal 2025, reflecting a year-over-year increase of 2.9% driven by organic growth, despite foreign exchange challenges and disposals [1] - Organic net sales rose by 5.9% year-over-year, with significant contributions from various regions, particularly Latin America and the Caribbean, which saw a 29% increase [2][3] Sales Performance - Organic volumes increased by 2.8% and price/mix improved by 3.1%, with phasing gains contributing nearly 4% to organic net sales growth [2] - Regional performance varied, with North America up 6%, Asia Pacific up 2%, Latin America and the Caribbean up 29%, Africa up 10%, while Europe remained flat [2] Tariff Impact - The company faces a 10% tariff on U.K. and European imports into the U.S., with an estimated annual impact of C$150 million [5] - Tariffs between the U.S. and China are not expected to materially affect the business, with management aiming to mitigate nearly half of the operating profit impact [6] Strategic Initiatives - Diageo has launched the first phase of its Accelerate program, focusing on cash delivery goals and operational excellence, aiming for a more agile global operating model [7] - The company forecasts sustainable free cash flow of C$3 billion per year starting fiscal 2026, supported by C$500 million in cost savings over three years [8] Financial Guidance - Diageo anticipates a sequential improvement in organic net sales growth in the second half of fiscal 2025, despite a slight drop in organic operating profit compared to the previous year [10][12] - The effective tax rate for fiscal 2025 is projected to be around 25%, consistent with the previous year [13] Capital Expenditure - The company expects capital expenditure to be at the upper end of its previously guided range of $1.3-$1.5 billion for fiscal 2025 [14]