DGEAF - Diageo PLC (DEO) Q2 2024 Earnings Q&A Call Transcript
2024-01-30 16:28:02 ET
Diageo PLC (DEO)
Q2 2024 Earnings Q&A Conference Call
January 30, 2024, 03:00 PM ET
Company Participants
Debra Crew - CEO
Lavanya Chandrashekar - CFO
Conference Call Participants
Laurence Whyatt - Barclays
Olivier Nicolai - Goldman Sachs
Edward Mundy - Jefferies
Celine Pannuti - JPMorgan
Sanjeet Aujla - UBS
Simon Hales - Citi
Chris Pitcher - Redburn Atlantic
Sarah Simon - Morgan Stanley
Mitchell Collett - Deutsche Bank
Andrea Pistacchi - Bank of America Merrill Lynch
Presentation
Debra Crew
Good morning, everyone, and thank you for joining our interim results call for fiscal '24. I hope you had a chance to read our press release and watch our presentation on Diageo.com.
The first half of fiscal '24 was challenging as we lapped high single-digit growth in the prior year and faced an uneven consumer environment alongside the inventory challenges in LAC. Performance in the half was in line with the update we issued in November.
The group's organic net sales, or NSV, declined 0.6% in the first half of fiscal '24, and organic operating margin declined by 167 basis points. Excluding LAC, organic net sales grew 2.5%, driven by good growth in Europe, Asia Pacific and Africa. And our group organic operating margin declined 53 basis points, excluding LAC, and that's entirely driven by an increase of 70 basis points in our marketing reinvestment rate.
We unlocked a further $335 million of productivity cost savings across cost of goods, marketing and overheads. We generated strong free cash flow of $1.5 billion, up $0.5 billion, while continuing to invest in the future growth potential of our brands. This is driven by strong working capital management. And once again, we increased our dividend, up 5%.
Specifically, in North America, while NSV declined versus the prior year, we delivered sequential improvement when compared to the second half of fiscal '23 as our actions and interventions in the region began to show an early impact. We are focused on returning to high-quality share growth as the U.S. beers category continues to normalize. Outside of the COVID period, this was the first time North America delivered operating margin improvement since the first half of fiscal '18.
In LAC, having conducted a review of inventory levels and monitor performance in the critical holiday season, we've taken action and have further plans to reduce inventory to a more appropriate level for the current consumer environment by the end of fiscal '24....
Diageo PLC (DEO) Q2 2024 Earnings Q&A Call Transcript