Diageo (DGE) Q3 2026 TU earnings summary

Executive summary

• Organic net sales grew 0.3% in Q3, driven by 0.4% volume growth, with strong performance in Europe, Latin America & Caribbean, and Africa, but continued weakness in North America and Asia-Pacific.

• North America saw a 9.4% decline in organic net sales, mainly due to U.S. spirits down 15.4%, while Europe, LAC, and Africa delivered high single to double-digit growth.

• Strategic interventions are underway in North America, especially around pricing and competitiveness, with early positive results in targeted tequila brands.

• The company is preparing a major strategy update and operating framework redesign to be unveiled at the August Capital Markets Day.

• Focus remains on increasing financial flexibility and strengthening the balance sheet, supported by asset disposals.

Financial highlights

• Q3 reported net sales increased 2.3% year-over-year to $4,477 million, aided by hyperinflation adjustments and partially offset by disposals and limited FX impact.

• Organic net sales grew 0.3%; volume up 0.4%, price/mix down 0.1%.

• LAC organic net sales rose 16.2%, Africa 17.1%, and Europe 8.8%, while Asia-Pacific declined 0.8% due to weakness in Chinese white spirits.

• Free cash flow is expected to be around $3 billion after exceptionals, with a $100 million one-off inventory build for ERP implementation.

• For the nine months ended 31 March 2026, reported net sales declined 2.2% year-over-year to $14.9bn; organic net sales down 1.9%.

Outlook and guidance

• Fiscal 2026 guidance is unchanged: organic net sales expected to decline 2%-3%, organic profit growth flat to up low single digits, and $300 million in cost savings from the Accelerate programme.

• Free cash flow guidance remains at $3 billion, excluding a $100 million one-off for inventory build.

• Tax rate before exceptional items expected at ~25%; effective interest rate at ~4%.

• Capital expenditure projected at the lower end of $1.2–1.3 billion.

• Geopolitical risks, especially in the Middle East, are being closely monitored, with contingency plans for inventory and supply chain resilience.