Core Viewpoint - Diageo is exploring options for its business in China, including its majority stake in Sichuan Swellfun Co, and has engaged Goldman Sachs and UBS for asset review [1] Group 1: Business Operations in China - Diageo's principal activities in Greater China include distilling, warehousing, and marketing of Chinese whisky and white spirits, with ownership of one distillery and a 63% stake in Sichuan Swellfun Co [2] - In the last financial year ending June 30, Diageo reported an 8.4% organic increase in sales volumes in Greater China, although net sales fell by 9% organically [2] Group 2: Market Challenges - The company cited "challenging economic conditions" in its annual report, leading to a portfolio shift towards white spirits and lower-aged malts, which improved volumes but resulted in a negative price/mix [3] - Diageo's white spirits business faced reduced consumption occasions in the baijiu market after a year of strong double-digit growth [3] Group 3: Financial Adjustments and Disposals - In November, Diageo lowered its sales and profit forecasts due to pressures in the Chinese white spirits market and a soft consumer environment in the US [4] - Recent disposals include the sale of its stake in Guinness Ghana Breweries and Cacique rum, with plans to save around $500 million in costs over the next three years [5] Group 4: Leadership Changes - Sir Dave Lewis, a former Tesco and Unilever executive, became Diageo's CEO on January 1, succeeding Debra Crew [6]

Financial Performance - Fiscal Year 26 Q1 organic net sales growth was flat, but reported sales were negatively impacted by disposals[9, 10] - The flat organic net sales growth reflects an approximate 2.5% impact from Chinese white spirits[8, 21] - Adverse price/mix offset positive volume, largely driven by market conditions[8, 21] Regional Performance - Europe experienced strong growth at +3.5%, while Latin America and Caribbean grew +10.9%, and Africa +8.9%[12] - North America saw a decline of -2.7% due to a weaker US consumer environment and tequila category weakness[12] - Asia Pacific experienced a decline of -7.5%, impacted by weakness in Chinese white spirits[12] Future Outlook - Fiscal Year 26 free cash flow guidance is reiterated at approximately $3 billion, underpinned by managing maturing stock, A&P effectiveness, capex, and costs[8, 21] - Fiscal Year 26 organic net sales growth is expected to be flat to slightly down, including the impact from Chinese white spirits and a weaker US consumer environment[18] - Fiscal Year 26 organic operating profit growth is expected to be low to mid-single digit, updated for the revised organic net sales growth, including Accelerate and tariffs impact[18] Strategic Initiatives - The Accelerate programme is progressing well, simplifying the operating model for clearer, faster decision-making[8, 21] - The company aims for approximately $625 million in cost savings over 3 years through the Accelerate programme[15]