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* Organic net sales growth rises 1% vs -4.6% estimate
* N.America sales rise 12%, driven by tequila
* Europe, Asia sales continued struggle
* H2 sales expected to grow in all regions - CEO
(Adds details on U.S performance, outlook)
By Siddharth Cavale
Jan 28 (Reuters) - Drinks group Diageo on Thursday
reported an unexpected rise in underlying net sales growth for
the first half of its year on strong demand for spirits like
tequila at retail stores in the United States, sending its
shares up 4%.
Alcoholic drink makers have been hit as the pandemic closed
bars, restaurants and night clubs around the world and as travel
was restricted.
But Diageo, maker of Johnnie Walker whisky, produced a
strong performance in United States, which generates 80% of
sales from liquor retail outlets and grocery stores and accounts
for nearly 45% of group profits.
North America sales rose 12% in the six months to Dec. 31,
driven by strong consumer demand and a continuing shift towards
spirits over beer and wine. Retailers also replenished more
stock ahead of the holiday season.
Don Julio and Casamigos tequilas were the strongest
performers, followed by Ciroc Vodka and Bulleit bourbon, while
beer sales fell 15% due to COVID-19 restrictions on pubs and
restaurants in North America.
In other big markets, such as Europe, bars and restaurants
make up most of Diageo's sales and profits.
"Even though the external environment continues to be
volatile, we do expect to see good improvement in top line
across all our regions in the second half," chief financial
officer Kathryn Mikells, who will be leaving the company in
June, told Reuters.
Overall, Diageo, the world's largest spirits maker, reported
a 1% rise in organic net sales growth, compared with
expectations for a 4.6% drop, according to company supplied
estimates.
"Time for us to eat humble pie. Diageo announced an
incredibly resilient set of H1F21 results this morning, with
beats across the board," Bernstein analyst Trevor Sterling wrote
in a note.
The group stayed away from issuing any specific annual sales
outlook, but said it expected sales growth in all regions in the
second half of the year, given easier comparables with last
year, strong momentum in North America, and re-opening of bars
and restaurants in some of its other regions.
In Europe and Turkey Diageo's net sales declined 10%, in
Latin America and the Caribbean they fell 1%, while in Asia
Pacific they fell 3%. Only Africa posted flat net sales growth,
on a strong performance in Nigeria.
Adjusted earnings fell nearly 13% to 69.9 pence per share,
but beat the 67.8 pence analysts had expected, hit by higher
operating costs and a stronger pound.
Diageo also raised its interim dividend by 2% to 27.96 pence
per share.
(Reporting by Siddharth Cavale in Bengaluru; editing by Arun
Koyyur. Editing by Jane Merriman)
