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Drinks

Spirits Maker Diageo Makes 'Strong Start' To Financial Year

Spirits maker Diageo said on Monday it has made a strong start to its fiscal year 2021, with its US business performing 'ahead of expectations', as many countries ease their COVID-19 restrictions.

The maker of Johnnie Walker whisky and Smirnoff vodka said it continues to expect sequential improvement in organic net sales and operating profit compared to the second half of fiscal 2020, which ended on June 30.

However, on a year-over-year basis, it expects lower sales and margin dilution compared to the first half of fiscal 2020.

The company's shares rose more than 5% following the announcement.

'Resilient' Demand

In the US, Diageo said that it was seeing 'resilient consumer demand', with increased retailer confidence 'resulting in some re-stocking in the off-trade channel'.

In Europe, it said that demand remains 'robust', adding that the on-trade channel has 'largely re-opened with the easing of lockdown measures in most countries', although some countries have re-imposed partial lockdowns due to a spike in infections.

“We have made a good start to fiscal 21, with sequential improvement in our performance across all regions, driven by strong execution, robust demand in the off-trade channel and the gradual re-opening of the on-trade channel in most markets," commented Ivan Menezes, chief executive. "The pace of recovery from the COVID-19 pandemic and easing of government restrictions varies by market."

Looking Ahead

In terms of the remainder of the year, Menezes added, "Our outlook for the first half of fiscal 21 has improved since the year-end, reflecting the good start to the year, particularly for our US business. We continue to expect sequential improvement in organic net sales and operating profit compared to the second half of fiscal 20. Compared to the first half of fiscal 20, we still expect lower organic net sales and margin dilution.

"While the pace of recovery is uncertain, I am confident in our strategy, the long-term fundamentals of our business and Diageo’s ability to emerge stronger.”

News by Reuters, additional reporting by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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