finance

Diageo hails strong trading despite supply chain woes and cost pressures



Diageo has reported strong recent trading, with a better-than-expected recovery in Europe, despite mounting supply chain woes.

The beer and spirits group – which makes Guinness, Gordon’s gin and Smirnoff vodka among many others – hailed a solid start to its new financial year, with sales improvements across all regions, as consumers spend more at bars and restaurants following eased coronavirus restrictions.

Trading across Europe is recovering ahead of expectations, with the UK and many countries on the continent having opened up.

The group said its North American business was also performing strongly, but flagged supply chain constraints and costs rising globally, partly due to logistics problems.

Diageo stressed it was “managing” the inflationary pressures and expects a boost to operating profit margins, as sales pick up and consumers switch to more premium brands.

Shares in the FTSE 100 listed group lifted nearly 3% in morning trade.

Ivan Menezes, chief executive of Diageo, said: “We have made a strong start to fiscal year 2022, with organic net sales momentum across all regions.

“This reflects excellent execution, as we benefit from resilience in the off-trade and continued recovery in the on-trade, however we expect near-term volatility to remain, including the potential impact of any future waves of Covid-19.”

Diageo recently revealed underlying operating profits jumped by 18% to £3.7bn in the year to June, after net sales rose 16% to £12.7bn.

British business was boosted by strong retail spirit sales, as supermarket trade largely offset hospitality closures.

The figures in July showed its UK operations saw 7% annual sales growth, with spirit sales up 16%, as shoppers bought more whisky, vodka and gin.

However, beer sales slumped by 16%, due to the enforced hospitality closures in the UK.

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