Diageo plc (DEO) Q2 2026 Earnings Call

Investor webinar replay

Replay transcript excerpt

Good morning and welcome to the Diageo interim results presentation. As you know, it's my first results session for Diageo. In fact, this is my seventh week, and I'll share a few initial impressions and immediate priorities with you later. But first, I'd like to hand over to Nick to share with you the results of the first half of 2026. Nick? Thank you, Dave, and welcome to Diageo. In the context of a continued challenging macro environment and industry backdrop in many of our markets, but in particular U.S. spirits and Chinese white spirits, both organic net sales and organic operating profit declined 2.8%. Notably, excluding the impact from Chinese white spirits, we would have reported organic net sales down approximately 0.5% and approximately 1.5% growth in organic operating profit. Europe, LAC and Africa delivered strong growth, but this was more than offset by NAM and APAC. Our focus on cost savings benefited organic operating profit, but did not offset lower gross profit given the mix of market growth. This profit decline, as well as lapping the impact of the disposal of our businesses in Ghana and Nigeria, impacted our EPS pre-exceptionals, which declined 2.5%. Our focus on cash delivery continues, delivering just over $1.5 billion in free cash flow for the half year, but $164 million lower than last year due to adverse movement in working capital. We have also declared a dividend today of $0.20 per share and at the same time announced that we are moving to a dividend payout policy of 30% to 50%. This decision is not something that we have taken lightly. the one that we view as important in ensuring that we make the right decisions for the business for the long term. Dave will come back on this later. Now moving to regions, the biggest challenge has been a cir...