Sunday 27 January 2019 3:10 pm | Updated: Monday 03 June 2019 2:52 am

Diageo looks to key American market as it hopes price hikes will raise spirits

Drinks giant Diageo will be hoping for a strong performance in the US when it reveals its results later this week, with price hikes expected to boost margins.

The British brewer, whose brands include Guinness, Smirnoff and Johnnie Walker, will be eyeing a boost in sales of vodka and whiskey in the crucial North American market in its half-year results on Thursday.

In September the drinks firm warned currency volatility would leave a £175m dent in sales, with a reduction in profits of £45m.

Despite this, shares in Diageo have picked up since a low in October, with a boost in sales and profits expected thanks to improving sales in emerging markets and a hike in prices.

“Diageo has an impressive long-term record when it comes to shareholder returns,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

“With net debt looking like it might come in below the lower end of the target range and $550m (£417m) of disposal proceeds earmarked for shareholder returns, we expect that to continue – but of course there are no guarantees.”

In November Diageo announced plans to sell 19 brands to US rival Sazerac as it looks to focus on its premium drinks.

In addition, the firm has embarked on a cost-cutting strategy, which analysts said should help margins increase towards the target of an additional 1.75 percentage points by June.

“In these interim results investors will be interested to see if the company hits its target of mid-single digit organic net sales growth and their will also be a focus on the performance in Asia, especially China, given the slowdown in the economy there,” said analysts at the Share Centre.

“Any comments on India, which is as important as any market for the company, will also be of interest given that the company has taken full control of United Spirits.”