Diageo shares pop as Guinness maker hails improved trading
World’s largest spirit maker Diageo said that it had made a “good start” to the new financial year, driven by its US business, which is performing ahead of expectations.
Shares in the FTSE 100 drinks maker rose 6.1 per cent as markets opened this morning.
In an update before the firm’s AGM, chief executive Ivan Menezes said that the pace of recovery across its markets was different according to government restrictions.
However he added that the firm’s outlook for the full year had improved since it revealed a 47 per cent fall in last year’s profit in August.
“We continue to expect sequential improvement in organic net sales and operating profit compared to the second half of fiscal 2020.
“Compared to the first half of fiscal 20, we still expect lower organic net sales and margin dilution”, he said.
Along with other alcohol companies, the Guinness maker’s business was hammered by the coronavirus restrictions, which saw bars and restaurants closed around the world.
Sales were propped up by increased demand from people drinking at home, as well as the slow reopening of venues through the summer period.
Diageo’s US business, which Barclays analysts say makes up 45 per cent of the firm’s profits, is “performing strongly”, Menezes added, with more people choosing spirits over other types of alcohol.
Russ Mould, investment director at AJ Bell, said: “Diageo’s trading update is remarkably upbeat and shows good progress in getting operations back on track.
“Demand is returning from many important places, albeit some areas are likely to remain fragile near-term such as sales in airports and in emerging markets.
“Its job is to now focus on strongest areas and try to fuel positive sales momentum while waiting for the weaker markets to stabilise.”