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Diageo reports 5% profit rise following price increases and growth in premium sales

The company said there were double-digit net sales growth in scotch, tequila, and Guinness.

GUINNESS-OWNER DIAGEO has reported a growth in profits and sales this year despite a “challenging cost environment”.

According to the UK company’s preliminary results for the year to the end of June, net sales increased by 10.7% to £17.1 billion (€19.9 billion). The increase was attributed to strong organic net sales growth and favourable foreign exchange impacts. 

Organic sales were up 6.5%, despite volume declining by 7.4%.

Diageo recorded double-digit net sales growth in scotch, tequila and Guinness, with its more premium brands contributing 57% of overall organic net sales growth.

Diageo’s operating profit grew by 5.1% to £4.6 billion (€5.3 billion) compared to the previous financial year. Reported operating margin declined by 147bps, but this was offset by exceptional operating items and foreign exchange.

The company said price increases “more than offset” the impact of cost inflation on gross margin.

In February, Diageo increased the price of a pint by 12 cent, while it announced a further 4 cent increase to the price of its beers last month. The price change will be applied across the whole Diageo draught beer range from 14 August.

The latest price increase was not included in these results. 

Diageo chief executive Debra Crew said the results demonstrate the company’s “ability to consistently deliver resilient performance, even in challenging macro environments”.

“We have delivered strong fiscal 23 full-year results, with organic net sales growth of 6% and organic operating profit growth of 7%, both within our medium-term guidance. We expanded organic operating margin by 15 basis points in a challenging cost environment while continuing to invest in the business,” she said.

She said the company was able to “take strategic pricing actions with precision and effectiveness” due to its revenue growth management capabilities, deep consumer insights and smart reinvestment.

“Through free cash flow delivery, we increased our capital expenditure, acquired a number of brands to strengthen our exposure to attractive categories and bolstered our investment in maturing stock in fiscal 23, positioning us well for sustainable, long-term growth.”

Looking ahead to the next fiscal year, Crew said she expects operating environment challenges to persist, “with continued cost pressure and ongoing geopolitical and macroeconomic uncertainty”.

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