Surging demand for bourbon and tequila from US consumers helped Diageo to push up underlying net sales in the six months to December, as the drinks maker defied expectations of a decline in revenues.
The maker of Johnnie Walker whisky, Smirnoff vodka and Guinness said net sales growth, measured on an organic basis, was 1 per cent in the half-year period, defying expectations of a 4.6 per cent drop.
That was aided by strong sales of Don Julio and Casamigos tequilas and Bulleit bourbon through US retail stores, the company said, along with a recovery in China.
In North America, its largest market, sales jumped 12.3 per cent on an organic basis despite the coronavirus pandemic, a performance that analysts at RBC Capital Markets called “extraordinary”.
Operating profit was down 8.3 per cent to £2.2bn from a year earlier, however. Margins were squeezed with fewer sales through higher-margin channels such as bars and travel retail, as the pandemic forced consumers to stay at home.
The company increased its interim dividend by 2 per cent to 27.96p a share, but said it could not give financial guidance for the full year.
“We expect ongoing volatility and disruption in the second half of the year, particularly in the on-trade channel, which will make performance more challenging,” said Ivan Menezes, chief executive.
“The medium and long-term growth drivers and opportunities for our business remain intact and I am confident in our strategy, the resilience of our business and Diageo's ability to emerge stronger.”
The company said the French luxury group LVMH had agreed to pay it €181m in dividends from the Moët Hennessy wine and spirits joint venture, over which Diageo had began arbitration proceedings last year after LVMH originally said it would pay no dividend for 2019.