Diageo Share Price Plunged 12.2% on Weak LAC H1 Performance

The Diageo plc (LON: DGE) share price plunged 12.19% after the multinational alcoholic drinks company released its H1 fiscal 2024 earnings results. The company had initially issued an update about its H1 performance on 28 September 2023, where it expected to witness a steady improvement in organic net sales growth. 

The company noted that it had witnessed ongoing momentum across four of its five regional markets. However, when looking at its overall performance for the first half of fiscal year 2024, the company anticipates a slower growth rate than the second half of fiscal year 2023. 

The shift can be attributed to a considerably weaker outlook in the Latin America and Caribbean (LAC) region, which contributed nearly 11% of Diageo's net sales value in fiscal year 2023. In the first half of fiscal year 24, LAC is projected to experience a more than 20% decline in organic net sales compared to the previous year.

In North America, Diageo expects a gradual improvement in organic net sales growth in the first half of its fiscal year 24 compared to the second half of fiscal year 2023. The company intends to maintain distributor inventory levels in line with historical norms.

In Africa, the company expects to see an improvement in net sales growth rate during the first half of fiscal year 24 compared to the second half of fiscal year 2023.

There is continued momentum in Europe and the Asia Pacific region, but it is somewhat slower than the firm experienced in the second half of fiscal year 2023. In Europe, growth remains robust, even amid escalating geopolitical tensions in the Middle East, where Diageo has a significant presence as a leading spirits company. 

In the Asia Pacific region, the company continues to witness positive momentum despite a slower-than-expected recovery in China.

The decline in LAC's organic net sales growth is primarily attributed to the region's exceptional 20% growth in the first half of the fiscal year 2023. Macroeconomic challenges in the area have led to reduced consumption and a shift towards lower-priced products.

Looking ahead to the second half of fiscal year 2024, we expect to see a gradual improvement in both organic net sales and organic operating profit growth at the group level.

Diageo share price. 

The Diageo share price plunged 12.19% to trade at 2852.3p from Thursday’s closing price of 3248.3p.