(Sharecast News) - First-half profits at Diageo fell by more than a tenth as weakness in the Latin American and Caribbean (LAC) regions persisted, but the drinks giant pointed to improving trading conditions in the latter part of the financial year.
The company, which owns brands such as Johnnie Walker, Guinness and Baileys, said reported operating profit fell by 11.1% year-on-year to $3.3bn in the six months to 31 December, with the operating profit margin shrinking by 329 basis points to 30.3%. Organic operating profits were down 5.4%, but would have grown by 0.9% if LAC was excluded.
Net sales were down 1.4% year-on-year at $11bn, due to a $167m unfavourable foreign exchange hit and a 0.6% slip in organic net sales which was blamed on a 23% sales decline in LAC.
As reported in a trading update in November, the LAC regions faced tough comparators with the previous year as well as lower consumption and consumer downtrading due to "macroeconomic pressures".
"Materially weaker performance in LAC, driven by fast-changing consumer sentiment and high inventory levels, significantly impacted total business performance," said chief executive Debra Crew.
"Having conducted a review of inventory levels and monitored performance in the critical holiday season, we have taken action and have further plans to reduce inventory to more appropriate levels for the current consumer environment in the region by the end of fiscal 24. This is a key priority," Crew said.
Despite the weaker results, Diageo lifted its interim dividend by 5% to 40.50 cents per share.
Looking ahead, despite "continued global economic volatility", Diageo said the rate of profit decline would ease compared with the first half, while organic sales growth would pick up. In LAC specifically, the company pointed to a net sales decline of between 10% and 20% year-on-year.
Diageo (DGE)
