World: Diageo’s half-year sales grow almost 10%

Diageo, supplier of Johnnie Walker and Guinness, has reported its half-year results to 31 December 2022 showing an overall sales growth of almost 10%.

The British alcoholic beverage company detailed that its organic net sales (excluding the effect of acquisitions and currency moves) grew 9.4%, due to volume growth of 1.8% and increased prices in stores.

Organic operating profit also grew 9.7%, with margins “modestly higher,” Diageo said.

Looking to the future, over the medium-term from fiscal 23 to fiscal 25, Diageo expects organic net sales to consistently grow within a range of 5% to 7%, and organic operating profit to grow sustainably within a range of 6% to 9%.

“This is a solid performance from Diageo, underlining the strength and diversity of its brand portfolio,” head of equities at leading UK investment service Wealth Club, Charlie Higgins said.

He said that while not immune from economic headwinds and inflationary pressures, Diageo looks “better placed than most to weather the storm.”

Higgins added: “It is much easier to raise prices on a bottle of Johnnie Walker than on a bottle of shampoo or deodorant. So Diageo ought to have more pricing power than most consumer goods peers. This is a key reason for its resilient margins.

“If the economy hits the rocks, Diageo may see some downtrading to less expensive brands. But it’s unlikely consumers will cut back significantly on alcohol. And long-term premiumisation trends are unlikely to abate.

“Overall, Diageo is demonstrating why it is considered a high quality long-term compounder. While short-term blips can’t be ruled out, investors who abide by the famous Guinness slogan – “Good things come to those who wait” – could be rewarded,” Higgins commented.

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