Johnnie Walker sales gains boost Diageo in North America

{LONDON] Americans leading a revival of the classic cocktail are giving a boost to Diageo Plc, the world's largest distiller.

Organic net sales rose 4.2 per cent in the six months ended Dec. 31, topping the 3.7 per cent median analyst estimate, the London-based maker of Johnnie Walker whisky said in a statement Thursday. The shares rose as much as 2.3 per cent, the most since August, early Thursday in London.

The benefits from productivity initiatives will "keep coming" in the second half and Diageo expects to make good progress on the company's goal of expanding its profit margin, chief financial officer Kathy Mikells said on a call with reporters.

Diageo has joined other consumer-product companies, such as Unilever and Nestle SA, in cutting costs as activist investors take a growing interest in the sector.

"Diageo is a business in change," Jefferies analyst Ed Mundy wrote in a note to investors. "We see a perfect blend of productivity and top-line growth." Sales of Johnnie Walker grew 5 per cent in North America, and Diageo reported share gains for the Bulleit and Crown Royal brands. Vodka sales in the region fell 8 per cent, however, hurt by weakness in the Ciroc and Ketel One brands.

Operating profit gained 6.1 per cent, beating the 4.8 per cent estimate. But Diageo warned that exchange-rate movements for the year ending June 30 will cut net sales by around £460 million (S$852 million) and operating earnings by about £60 million.

Last year, the company agreed to buy Casamigos, a tequila backed by the actor George Clooney, in a deal worth as much as US$1 billion. It's also re-entered the Irish whiskey category, in which it hadn't competed since selling Bushmills to Jose Cuervo in 2014.

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