Q3 2025 Diageo PLC Trading Update Call

Hello, and welcome everyone to see how she has Q3 trading update the call today will be hosted by Jeff Mcrae, Chief Executive Nick Hungry, Jani, Chief Financial Officer, and Sonya Gabriel Global head of Investor Relations. My name is D C and I'll be coordinating the call today.

Operator: Hello and welcome everyone to Diageo's Q3 Trading Update.

Operator: The call today will be hosted by Debra Crew, Chief Executive, Nik Hangeani, Chief Financial Officer, and Sonya Ghobrial, Global Head of Investor Relations.

Operator: My name is Lucy and I'll be coordinating the call today.

Operator: If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad.

Sonya Gabriel: If he would like to ask a question you may do so by pressing star followed by one on your telephone keypad to begin I will now hand over to Sonya Sonya. Please go ahead when you're ready.

Operator: To begin, I will now hand over to Sonya. Sonya, please go ahead when you're ready. Thanks very much.

Yes.

Speaker Change: Thanks, very much good morning, everyone and welcome Yeah, Q3 trading update call unfairly golf Brown head of Investor Relations and I'm joined this morning by John Christie and thank John Yes, yes.

Sonya Ghobrial: Good morning, everyone, and welcome to Diageo's Q3 Trading Update Call. I'm Sonya Ghobrial, Head of Investor Relations, and I'm joined this morning by Debra Crew, CEO, and Manik Jhangiani, CFO.

Sonya Ghobrial: Just a remind, listeners on the call, that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement for more detail, including factors that could lead to actual results to different maturities than those expressed in, or implied by, any such forward-looking statements.

Speaker Change: Just to remind listeners on the call that in the discussion today. The company may make certain forward looking statements, including Don Briggs, our estimates plans and expectations you should buy.

Speaker Change: This morning's announcement more detail, including the kidney Johnson resolved two different maturity and those expressed in or implied by any such forward looking statements.

Sonya Ghobrial: Hopefully you've all seen this morning's press release.

Speaker Change: Even in this mornings press release.

Sonya Ghobrial: On today's call, I'll hand over to Debra for some brief comments on the quarter, before opening the line to those who'd like to ask a question.

Nicola: Nicola hundreds.

Speaker Change: For some brief comments on culture before opening the lines for those who'd like to ask a question if you could.

Sonya Ghobrial: If you could keep questions to one question per broker or investor, that would be appreciated, and allow us to get through more, and also to make flights to Dublin.

Speaker Change: The questions to one question part broker investments you have made changes and allowed us to get you more and all of them to make fun of Dublin.

Debra Crew: With that, let me hand over to Debra. Thanks, Sonya. And good morning, everyone. We saw good organic sales growth in our third quarter and reported net sales of $4.4 billion were up 2.9% on last year, with organic net sales partly offset by unfavorable exchange and disposals. Q3 Organic Net Sales Growth at 5.9% puts us on track to deliver on our guidance, namely sequential improvement in the second half compared to the first half of the year. Organic Net Sales Growth in Q3 saw a significant benefit from phasing, which we estimate was around 4 percentage points of the 5.9% Organic Net Sales Growth that we reported.

Speaker Change: But in terms of what you Deborah.

Speaker Change: Thanks, Tania and good morning, everyone. We saw good organic sales growth in our third quarter and reported net sales of $4 $4 million were up two 9% on last year with organic net sales, partly offset by an unfavorable exchange in Q.

Speaker Change: Q3 organic sales growth of five 9% puts us on track to deliver on our guidance, namely sequential improvement in the second half compared to the first half of the year.

Speaker Change: Organic net sales growth in Q3 saw a significant benefit from safe from Beijing, which we estimate was around four percentage points of the five 9% organic net sales growth will be reported we expect this phasing to reverse in Q4.

Debra Crew: We expect this phasing to reverse in Q4. This benefit was mainly in North America and also in Latin America and Caribbean. In North America, Organic Net Sales increased 6.2% driven by the pull forward of imports to distributors ahead of potential tariffs in the quarter, as well as continued tequila restocking, given strong Don Julio consumer sales performance. Favorable comparatives also held. In LAC, organic net sales growth was 28.5%. We saw easy comparatives given the LAC being significant inventory de-stocking in the prior year, as well as continued stabilization, particularly in Brazil. In APAC, organic net sales were up 1.6% ahead of growth we saw in the first half, mainly due to soft comparatives in China and Southeast Asia, along with continued growth in India.

Speaker Change: The benefit was mainly in North America, and also in Latin America and Caribbean.

Speaker Change: In North America organic net sales increased six 2% driven by the pull forward of imports to distributors ahead of potential tariffs in the quarter as well as continue to heal a restocking given strong Don Julio consumer sales performance favorable comparative has also helped in.

Speaker Change: And land organic net sales growth was 28, 5%.

Speaker Change: Easy comparative given the lapping significant inventory destocking in the prior year as well as continued stabilization, particularly in Brazil.

Speaker Change: In APAC organic net sales were up one 6% ahead of growth we saw in the first half mainly due to soft comparative in China and southeast Asia, along with continued growth in India.

Debra Crew: In Europe, organic net sales were flat, with good continued Guinness performance offset by spirit softness, and in Africa, we continued to see strong growth.

Speaker Change: In Europe organic net sales were flat with good continued get us performance offset by spirit softness.

Speaker Change: And in Africa, we continued to see strong growth.

Debra Crew: Moving on to update on U.S. tariffs and updating our earlier comments for the expected impact of what remains an evolving situation. As you can see from the slide, based on the current announced U.S. import tariffs and assuming a 10% tariff on U.S. imports from the U.K. and Europe, which would include our Johnny Walker, Guinness, and Bailey's brands, we estimate that before the annualized impact that this would be around $150 million. We would expect to mitigate before any pricing actions around 50% of this, leveraging actions including inventory management, supply chain optimization, and cost management. As you can imagine, given all the scenario planning we've been doing for some time, some of this work has been done or is currently already underway.

Speaker Change: Moving on to update on U S tariffs and updating our earlier comments for the expected impact of what remains an evolving situation.

Speaker Change: As you can see from the slide based on the current announced U S import tariffs and assuming a 10% tariff on U S and worse from the U K and Europe, which would include our Johnnie Walker Denison Bally's brands, we estimate for mitigation the annualized impact of this would be around $150 million.

Speaker Change: We would expect to mitigate for any pricing actions around 50% of this leveraging actions, including inventory management supply chain optimization and cost management.

Speaker Change: As you can imagine given all the scenario planning we've been doing for some time. Some of this work has been done or is currently already underway.

Debra Crew: The estimated tariff impact also assumes that our Canadian and Mexican imports into the U.S., which altogether are almost 50% of our U.S. net sales, remain exempt from tariffs as part of USMCA. Going forward, we would look to mitigate fully the tariffs, and this is where we have a long track record of managing international tariffs, giving us confidence that we can do this successfully.

Speaker Change: The estimated tariff impact all solutions that our Canadian and Mexican imports into the U S, which altogether are almost 50% of our U S. Net sales remain exempt from tariffs as part of U S. M C N.

Speaker Change: Going forward, we would look to mitigate fully the tariffs and this is where we have a long track record of managing international tariffs, giving us confidence that we can do this successfully.

Debra Crew: To update on the full year, we have reiterated our Organic Net Sales and Organic Operating Profit guidance from our interim results. We continue to see a sequential improvement in organic net sales compared to the first half and expect organic operating profit in the second half of the year to decline, broadly in line with the first half of the year, which was down 1.2 percent. We have updated both tax and interest costs, and we now expect our effective interest rate to be slightly lower than fiscal 24, a 4.3%, compared with flat previously. On tax, we have updated how we report, and on this basis, which excludes the impact of the share of associates, we expect the effective tax rate for FY24 to be in the region of 25%, broadly in line with last year.

Speaker Change: Okay on the full year, we have reentered reiterating our organic net sales and organic operating profit guidance from our interim results.

Speaker Change: We continue to see a sequential improvement in organic net sales compared to the first half and expect organic operating profit in the second half of the year to decline broadly in line with the first half of the year, which was down one 2%.

Speaker Change: We have updated both tax and interest costs and we now expect our effective interest rate to be slightly lower than fiscal 'twenty, four or four 3% compared with black previously.

On tax we have updated how we report and on this basis, which excludes the impact of the share of associates. We expect the effective tax rate for fiscal 'twenty four to be in the region of 25% broadly in line last year.

Debra Crew: We expect leverage at the end of the full year to be in the range of 3.3 to 3.5 times. Looking forward to fiscal 26, we continue to expect to deliver positive operating leverage with organic operating profit growth ahead of organic net sales growth.

Speaker Change: We expect leverage at the end of the full year to be in the range of $3 three to three five times.

Speaker Change: Looking forward to fiscal 'twenty six we continue to expect to deliver positive operating leverage with organic operating profit growth ahead of organic net sales growth.

Debra Crew: Finally, I'd like to update you on the launch and the first phase of our Accelerate program, consistent with our strategic priorities and our focus on what we can manage and control. The program sets out clear, near-term cash delivery targets and a disciplined approach to operational excellence and cost efficiency. It will strengthen Diageo by increasing our effectiveness, agility, and resilience.

Speaker Change: Finally, I'd like to update you on the launch in the first phase of our accelerate program consistent with our strategic priorities and are focused on what we can manage and control. The program sets out clear near term cash delivery targets and a disciplined approach to operational excellence and cost efficiency. It will strengthen the RVO by increasing our effectiveness.

Speaker Change: Agility and resilience.

Debra Crew: We will share more details on the actions being taken behind this program and our full year results on the 5th of August. However, today, let me share some expectations from the first phase. We expect to deliver around $3 billion in free cash flow per annum from Fiscal 26, increasing as performance improves. This will be supported by a cost savings program of approximately $500 million over three years, which will enable both reinvestment in future growth and also improved operating leverage. We also expect to return to well within our target leverage ratio range of 2.5 to 3 times net debt to EBITDA no later than fiscal 28, providing us with a lot more flexibility, which will also be supported by appropriate and selective disposals over the coming years.

Speaker Change: We will share more details on the actions being taken behind this program and our full year results on this August however, today, let me share some expectations from the first phase.

Speaker Change: We expect to deliver around $3 billion in free cash flow per annum from fiscal 'twenty six increasing as performance improves.

Speaker Change: This will be supported by a cost savings program of approximately $500 million over three years, which will enable both reinvestment in future growth and also improved operating leverage.

Speaker Change: We also expect to return to well within our targeted leverage ratio range of two five to three times net debt to EBITDA no later than fiscal 'twenty eight providing us with a lot more flexibility, which will also be supported by appropriate and selective disposals over the coming years.

Debra Crew: I'm looking forward to sharing more as we move through the year, and I'm excited about how this can strengthen Diageo. Finally, it's important to highlight that nothing has changed in our view that SPIRITS remains an attractive sector with a long runway for growth, supported by favorable long-term fundamentals. We continue to believe that the near-term pressure is largely macroeconomic driven with continued uncertainty for consumers impacting both time and pace of recovery.

Speaker Change: I'm looking forward to sharing more as we move through the year and I'm excited about how this can strengthen the ASEAN.

Speaker Change: Finally, it's important to highlight that nothing's changed in our view that spirit remains an attractive sector with a long runway for growth supported by favorable long term fundamentals.

Speaker Change: We continue to believe that the near term pressure is largely macroeconomic driven with continued uncertainty for consumers impacting both time and pace of recovery.

Operator: With that, I'd like to hand back to the operator to open the line for questions for Nick and myself. If you would like to ask a question, you may do so by pressing star followed by 1 on your telephone keypad now. If you do change your mind, please press star followed by 2. When preparing to ask your question, please ensure your line is unmuted locally.

Speaker Change: With that I'd like to hand back to the operator to open the line for questions for Nick and myself.

Speaker Change: If you would like to ask a question you may do you save by pressing star followed by one on your telephone keypad now if you do you change your mind. Please press star followed by Chi Wen preparing to ask your question. Please ensure your line is unmated locally.

Andrea Pistacchi: The first question comes from Andrea Pistacchi from Bank of America.

Speaker Change: The first question comes from Andrea Staci from Bank of America. Andrea Your line is now open. Please go ahead.

Andrea Pistacchi: Andrea, your line is now open, please go ahead. Yes, thank you. Hi, Debra, Nick and Sonya. My question is on the $3 billion free cash flow, please, the target you provided. I think consensus is more or less at $3 billion for the next few years.

Andrea Staci: Yes, Thank you hi.

Speaker Change: Hi, Deborah Nick controlling you. My question is also on the 3 billion free cash flow to use you know the target you provided I think consensus is Morales shops 3 billion for the next to the next few years.

Debra Crew: So the question is, besides the cost savings you've announced, which will support the cash generation, what do you have to deliver that you're not doing already on working capital and CapEx efficiencies to get to $3 billion? And in what circumstances could you actually deliver more?

Speaker Change: My question is besides the cost savings, you've announced which will support the cash generation.

Speaker Change: You have to deliver but you're not doing already on working capital and Capex efficiencies to get a 3 billion and then what circumstances would you add.

Speaker Change: Chile deliver more.

Gabriel: Hey, Andrea so listen I mean, let me step back and say I think consensus you know has some very huge ranges on the estimates that are out there and.

And given the inconsistency of delivery in the last five years quite honestly I'm not surprised that it is so I think that's a bursting we need to do to help guide you guys much better and that's what we've tried to do today to ensure that we've almost got this is a floor and we know we can grow from here going forward. So I.

Gabriel: I think a couple of things that I would call out to you.

Gabriel: Lastly in 'twenty six in particular, Capex will remain a little more elevated although coming down from the 25 levels.

Gabriel: Given some of the projects that are in flight and what we need to continue.

Gabriel: Delivering on because it's actually not going to help us to pull back on some of those are actually productivity savings that will start helping as we look forward into 'twenty, seven and beyond as well, but if I look at Capex looking forward clearly that will be a focus that will allow us to further drive that free cash flow delivery.

Gabriel: And then on working capital I think the team has done a really good job so far and we do have more opportunities to unlock.

Gabriel: Part of that might be a little more I would say is back end weighted as we look to unlock pieces on both the receivable side in line with what we're doing in terms of our commercial A&P, our trade spend how we work with our customers at central as well as on the inventory.

Gabriel: So I think both of those will start coming through as well that will support an increase to that 3 billion number.

Gabriel: Then the third piece I would call out to you is the work we continue doing on mutually liquid so clearly that will support us as well as we look to continue to tweak those are estimates.

Gabriel: Estimates and forecasts.

Gabriel: And also continuing to look at how we utilize the stocks that we have in place in the right way because it is liquid gold fall.

Gabriel: Whiskey in particular that we need to look at it from an angle of how do you best maximize value from that and how do we look to lay down appropriately keeping the long term in mind as well. So those are the three big elements of course, and then the last piece, which is clearly what we're focused in on and supported by the accelerate program.

Gabriel: Is what we can do to drive savings in our P&L are that can support free cash flow delivery, even absent potentially you know a full recovery.

Gabriel: In the shorter term and then Denver said clearly we do expect the long term fundamentals of this this category are very attractive and the business will return to growth and there will be a need that accelerated leverage even further in coming through the P&L that will support that so I guess just.

Gabriel: Summarizing back is really not slow from which we feel very good that we can grow and there's multiple levers to help support that clarity will support our deleveraging.

Gabriel: Alongside what we will be also doing on disposals.

Debra Crew: One super quick follow-up on this, please. Now, it's just a clarification on the 500 million of cost savings. Is there a cost of achieving those? And I guess that would be obviously incorporated anyway in the in the target. It will be incorporated but we provide you more color and details on phasing of both the savings and cost to achieve as we finalize our plans around a bunch of those areas by August.

Speaker Change: One Super quick follow up on.

Gabriel: And basically it's supposed to.

Gabriel: [laughter].

Gabriel: That was just a clarification. So the 500 million of cost savings is there a cost of achieving those and I guess, what would be obviously incorporated anyway, and the and the targets.

Gabriel: It will be incorporating what will provide you more color and details on phasing of both the savings and cost to achieve as we finalize our plans around a bunch of those areas by August.

Andrea Pistacchi: Very good. Thank you very much. Thank you.

Gabriel: Very good thank you very much.

Gabriel: <unk>.

Simon Hales: The next question is from Simon Hales of Citi.

Speaker Change: The next question is from Simon Hales of Citi. Simon Your line is now open. Please go ahead.

Simon Hales: Simon, your line is now open, please go ahead. Thank you.

Oh. Thank you good morning to everyone has shown good morning, Nick can I just stick with the accelerate program. Please.

Simon Hales: Morning, Debra. Morning, Sonya. Morning, Nick.

Simon Hales: Can I just stick with the Accelerate programme, please?

Simon Hales: On the £500 million cost savings, can you share a little bit more as to where they're coming from, perhaps the phasing of those savings? And obviously, you talk about some reinvestments, but obviously some dropping through to the bottom line. How should we think about that?

Speaker Change: On the 500 million cost savings can you share a little bit more as to where they're coming from perhaps the phasing of those savings and obviously you talked about some reinvestments, but obviously sudden dropping through to the bottom line. How should we think about that and then associated with that.

Nick Hangeani: And then associated with that and the Accelerate programme and the mid-term deleverage, Nick, you just mentioned potentially selective disposals in the coming years. How should we think about the timing of that, the potential scale of that? Is this just portfolio trimming for Diageo again, or could this be bigger strategic moves than we've seen in the past?

Speaker Change: To accelerate president in the midterm deleverage mix you just mentioned potentially selected disposals in the coming years, how should we think about the timing of the potential scale of that is this just portfolio trimming could Dr. Zhu again or could you speak biggest strategic moves that we've seen in the past.

Nick Hangeani: Yeah, so let me start with that one, Simon. So, you know, clearly we see through our reviews that we've been doing internally and with the board some opportunities for what I would call substantial changes versus the portfolio trimming. So again, you know, you can appreciate, I can't say any more than that, but clearly it's going to be above and beyond the usual smaller brand disposals that you've seen over the last three years.

Speaker Change: Yeah. So let me start with that one assignment. So clearly we see through our reviews that we've been doing internally and with the board.

Speaker Change: Some opportunities for what I would call substantial changes versus the portfolio trimming.

Speaker Change: So again you know you can appreciate I can't say any more than that but clearly it's going to be above and beyond the usual smaller brown disposals that you've seen over.

Speaker Change: Over the last three years.

Nick Hangeani: What does that mean in terms of the leveraging and timing? Well, clearly, as you can imagine, you know, our focus would be that we want to maximize value for Diageo and all our shareholders. And so with any kind of M&A or disposals transactions, you know, you could get certain things kind of agreed and announced, but timing of transactions, closure, and cash coming in are very much dependent on a number of factors. So leave that with us from an angle that, you know, I can't give you more on it other than the fact that we said no later than the fiscal 28, which should give you all confidence and comfort around two factors.

Speaker Change: What does that mean in terms of deleveraging and timing well clearly as you can imagine are all focus would be that we want to maximize value for our Dr. Shaw and all our shareholders and so with any kind of M&A or disposals transactions Ah you know you can get seven.

Speaker Change: Things kind of agreed and announced but timing of transactions.

Speaker Change: Transactions closure and cash coming in are very much dependent on a number of factors. So so leave that with us.

Speaker Change: From an angle that I can give you more on it other than the fact that we set no later than the fiscal 'twenty, eight which should give you confidence and comfort around two factors.

Nick Hangeani: One, we've talked about the fact that this is going to be well within. So well within is not just dropping into, you know, just sub three. It's really being at least at that midpoint is not below. And two, we do say no later because we do believe that will be, you know, it could happen even earlier. But again, we would do it in the right way to maximize value and do it in the right way to look at the buyer universe, you know. and all the elements that go with a typical disposal.

Speaker Change: One we've talked about the fact that this is going to be well within so well with them is not just dropping it to just sub three.

Speaker Change: It's really being at least at that midpoint is.

Speaker Change: If not below.

Speaker Change: And two we do say no later, because we do believe that will be you know it could happen even earlier, but again, we would do it in the right way to maximize value and do it.

Speaker Change: The right way to look at the buyer universe are you now.

Speaker Change: And with all the elements that go with it typical disposal. So that's on the first one on your question around the $500 million savings listen I would say, there's there's four main buckets and the first two.

Nick Hangeani: So that's on the first one.

Nick Hangeani: On your question around the $500 million savings, listen, I would say there's four main buckets and the first two are really around overall trade investment as well as our A&P spend. Now, I did highlight when we were cagney around the opportunity on the development costs and the non-working, but I clearly believe that... opportunities across all areas as we look at the levels of spend, the efficiency, the allocation and prioritization, and the returns, and keeping in mind where we need to drive this efficiency. So I think keeping the right principles in mind, I think across all areas, including trade investment, we have an opportunity.

Speaker Change: Really around overall trade investment.

Speaker Change: As well as our A&P spend now I did highlight when we went cagny and go Wow the opportunity on the development Austin, they're not working but I clearly believe there is.

Speaker Change: Opportunities across all areas as we look at the levels of spend the efficiency the allocation and prioritization and the returns and keeping in mind, where we need to drive the sufficiency. So I think keeping the right principles in mind, I think across all areas, including trade invest.

Speaker Change: And we have an opportunity the second piece is around Volta has and I think.

Nick Hangeani: The second piece is around overheads. And I think, you know, we've highlighted in the release how we want to think about our operating framework and model choices to really leverage our skills, but continue to build a much more agile and resilient, but then drive efficiency and effectiveness for how we do things. So that's going to be the second big bucket.

Speaker Change: We've highlighted in the release, how we want to think about operating framework and smuggled choices to really leverage our scale and continuing to build a much more agile and resilient and then drive efficiency and effectiveness of how we do things. So that's going to be the second big bucket.

Nick Hangeani: And then I think the third one is really our supply teams, you know, continue to do a great job as we look at offsetting inflationary pressures, but there's also broader efficiency plays that we'll be looking at within supply. And part of that goes back to some of the work that the team has done with the agility, supply agility program. So those will start coming through as well.

Speaker Change: And then I think the third one is really our supply teams are continuing to do a great job as we look at offsetting inflationary pressures, but there is also broader efficiency plays that we'll be looking at within supply and part of that goes back to some of the work that the team has.

Speaker Change: Done with the agility of supply agility programs. So those will start coming through as well on phasing and timing signed and we're working through that so just be patient with us and we'll provide you an update on that in August.

Nick Hangeani: On phasing and timing funding, we're working through that. So just be patient with us, and we'll provide you an update on that in August.

Speaker Change: Many thanks.

Celine Pannuti: The next question comes from Celine Pannuti of JP Morgan. Celine, your line is now open, please go ahead. Good morning, and thank you for taking my question.

Speaker Change: The next question comes from Celine Penuche of J P. Morgan filling your line is now open. Please go ahead.

Celine Penuche: Good morning, and thank you for taking my question. So I will talk about to the absolute added Ray you mentioned that she.

Celine Pannuti: So I will talk about the outlook. Debra, you mentioned H2-26 to be broadly in line with H1-26 in terms of top line. For fiscal year three, I meant 25. For fiscal year 26, I'm getting there. Fiscal year 26, you mentioned to have operational leverage. But can you talk about how you see the top line evolution and the current environment? It seems that you are still cautious on consumption. Am I right to believe that this is in the U.S.? Is there any other regions you would like to flag? And from a price mix perspective, there are a few elements in your discussion where you mentioned down trading.

Speaker Change: In fact ex to 'twenty six to be broadly in line with H 126 in terms of topline and for 'twenty for Sysco.

Celine Penuche: Yeah, sorry, I meant 25 apologies.

Celine Penuche: 26, and are you and I'm getting down at fiscal year 'twenty. Six you mentioned two of our personal leverage that can you talk about how you see the top line evolution and the turnaround environment. It seems that send you asked Sheila cautious on the consumption and am I right to believe that this.

Celine Penuche: He's in the U S is there any other regions you would like to flag and from a price mix perspective to ask you any Monsignor discussion when you mentioned down trading if you could elaborate on how you see consumption at pricing angle, you Shouldnt, especially if there is no and inflation and that's true.

Celine Pannuti: If you could as well elaborate on how you see consumption, pricing evolution, especially if there is no inflation-led true tariff.

Debra Crew: Thank you. Yeah, so let me take those. I think that's three questions in order. So, on fiscal 25, so that's where we had said we would see sequential improvement in the second half versus the first half, and with this strong Q3 performance, we feel like we're on track to do that. For fiscal 26, we have guided on operational leverage. We did not talk about the top line, and that was quite purposeful, and that we've done a robust kind of scenario planning around multiple scenarios, one of which you would see recovery, but we've also looked at scenarios where we may not see that recovery.

Celine Penuche: Thank you.

Celine Penuche: Yeah. So let me take those I think that's three questions in order and so on and the fiscal 'twenty five.

Celine Penuche: So we are that's where we just said we did see sequential improvement in the second half versus the first town and with this you know strong Q3 performance, we feel like we're on track to do that.

Celine Penuche: For fiscal 'twenty six we have guided on operational leverage we did not talk about the top line and that was quite purposeful and that we've got robust kind of scenario planning around multiple scenarios, one of which you wouldnt see recovery, but we've also looked at it.

Celine Penuche: Scenarios, where we may not see that recovery I'm, just given the uncertainty to your point you asked about sort of the U S. Certainly the uncertainty in the U S. But we also see a lot of uncertainty still coming out, particularly in places like aim high and we are seeing some you know down trading in APAC.

Celine Penuche: As well as you know Europe I would say in general it's just an uncertain environment, we're performing well and Dennis.

Debra Crew: We're performing well with Guinness, but regardless, there's just a lot of uncertainty, and so with that, what we wanted to do was assure folks that we had done this robust scenario planning, and in any of these scenarios, we're looking at operational leverage, and we are looking at the $3 billion in free cash.

Celine Penuche: But but regardless, there's just a lot of uncertainty and so with that what we wanted to do was to shore folks that we had done this robust scenario planning and in any of these scenarios. We're looking at operational leverage and we are looking at the $3 billion of free cash flow.

Debra Crew: Thank you. Can I just comment on the pricing environment as well in that context? Yeah, I think, look, I'm quite pleased that on the quarter, we delivered quite balanced between volume and price mix. You know, there is a lot of promotion out there, particularly in certain categories. We're seeing it a lot in tequila, we're seeing it a lot in whiskey. You know, RTV has, you know, remained, you know, another place that, you know, we certainly see a lot of pricing come in. That being said, you know, if you remember from our first half results, we talked about our price pack architecture and some of the ways that we're focused on small sizes as a way to address the consumer pressure and, you know, address some of this pricing to the, you know, what we're seeing in a lot of markets isn't so much down trading.

Thank you can just come on to in the pricing environment as well in that context.

Speaker Change: Yeah, I think look I I'm I'm quite pleased that on the quarter, we delivered a quite balanced between volume and price mix. You know there is a lot of promotion out there, particularly in certain categories and we're seeing it a lot to heal ever seen and a lot of whiskey you know Archie D. As you know remain.

Celine Penuche: Another place that you know, we certainly see a lot of pricing come in.

Celine Penuche: That being said and you know if you remember from our first half results, we talked about our price pack architecture and some of the ways that we're focused on small sizes as a way to address the consumer pressure and address under this pricing to the you know what we are seeing a lot of markets isn't so much down trading they want premium products.

Debra Crew: They want premium products, but their, you know, their household cash is strapped. And so, you know, by offering a smaller size of premium products, we're finding that that's working for us in many markets, including the U.S.

Celine Penuche: There you know their their household cash strapped and so you know by offering a smaller size of premium products. We're finding that that's working for us in many markets, including the U S.

Celine Pannuti: Thank you very much.

Celine Penuche: Thank you very much.

Celine Pannuti: Thank you.

Celine Penuche: Thank you.

Mitch Collett: The next question is from Mitch Collett of Deutsche Bank. Mitch, your line is now open, please go ahead. Good morning Debra, Nick and Sonya.

Speaker Change: The next question is from Mitch collect of Deutsche Bank Mitch. Your line is now open. Please go ahead.

Speaker Change: But.

Speaker Change: When you get the net and Sonya I'll stick to one you say in your release that ship plus 70.

Mitch Collett: I'll stick to one. You say in your release that it's shifted to plus seven in the U.S. depletions, five percentage points below that, so 2% depletion growth, but I don't think you gave consumption growth. I agree, I appreciate that.

Speaker Change: In the U S vacation.

Speaker Change: Five percentage points.

Speaker Change: So 2% depletion growth, but our U k's consumption growth of I agree I. Appreciate that's not only a member you get a.

Debra Crew: That's not normally a number you give, but I'd be interested in what you think consumption growth is trending at and how that's evolved really since your ONH results back in February. Yeah, thanks, Mitch. I think it was hard to hear you, but I think you're asking about consumption growth in the U.S. and how that has moved since H1. I mean, you know, look, as you know, Nielsen and NAFCA only really track 40% of the U.S. And so, you know, you see those numbers. What we saw, what I would say is if you go back to January, we came into the half feeling like there was, you know, the industry was getting a little bit of momentum.

Speaker Change: I'd be interested in what you think consumption just trying to get and how that's evolved really shouldn't show.

Speaker Change: Well its results back in February thank you.

Speaker Change: Yeah. Thanks, Mitch I think is it was hard to hear you, but I think you're asking about consumption growth in the U S and how that is nuisance H. One I mean, you know look as you know Nielsen and naphtha only really track 40% of the U S. And so you know you see those numbers and what we saw when I was.

Speaker Change: If you go back to January we came into the half are feeling like there was you know the industry is getting a little bit of momentum there.

Debra Crew: February and March were very tough. And of course, not only did we see it across our industry, but you saw it across all of consumer goods in the U.S. And there was a sharp downturn in consumer sentiment. And, you know, so with that, You know, look, in April, the industry recovered a little bit, but you also have to remember that Easter shifted from March to April. So, you know, you see our depletion numbers. I actually feel good about how we performed in the quarter.

Speaker Change: Anywhere in March were very tough and and of course, not only did we see it across our industry, but you saw it across all consumer goods in the U S and U M. There was a sharp downturn in consumer sentiment.

Speaker Change: And so with that.

Speaker Change: You know look in April the industry recovered a little bit but you also have to remember that Easter shifted from March to April. So you know you see our depletion numbers I actually feel good about how we performed in the quarter that being said you do have to remember and I flagged as I said last years.

Debra Crew: That being said, you do have to remember, and I flagged this in last year's prelim results. We did have retailer de-stocking that, so if you remember between certain that happened in West Coast retailers which are tracked by Nielsen, so that was a difference last year in the consumption versus the depletions. So you also have to take that into effect that we were lapping that.

Speaker Change: Prelim results.

Speaker Change: We did have retailer destocking.

Speaker Change: But Sophie if you remember between sort of and it happened in west coast retailers, which are tracked by Nielsen. So that was a difference last year and the consumption versus the depletions.

Speaker Change: So you also have to take that into effect that we were lapping that so you know what I would say is is that where we're acknowledging there's a lot of uncertainty out there and this is one of the reasons. We're doing you know planning around all of those scenarios to make sure that we are responsive to what's happening in the market.

Debra Crew: So, you know, what I would say is that we're acknowledging there's a lot of uncertainty out there and this is one of the reasons we're doing, you know, planning around all of those scenarios to make sure that we are, you know, responsive to what's happening in the market. Understood. Thank you.

Speaker Change: Understood. Thank you.

Speaker Change: Thank you.

Sanjeet Aujla: The next question comes from Sanjeet Aujla from UBS. Sanjeet, your line is now open. Please go ahead.

Speaker Change: The next question comes from Us some cheat.

Shneur: Shneur <unk> from UBS Sanjay <unk>. Your line is now open. Please go ahead.

Sanjeet Aujla: Good morning, everyone. One question from me, please, just around the Outlook for Agave course. Nick, can you give us a feel for how material this could be in fiscal 26, and to what extent this is also supporting your operating leverage outlook? Um, so I would say clearly there will be benefits, but we also have to look at it from not just the cost of the material, but the elements around currency, uh, piece as well. So, um, I think, you know, clearly growth in tequila and what we should see as a favorable trend on the cogs should help on that operating leverage, but we're not relying solely on that.

Speaker Change: Good morning, everyone. One question for me. Please just around the outlook for agave costs. Nick can you give us a feel for how material. This could be in fiscal 'twenty six and to what extent. This is also supporting your operating leverage outlook.

Speaker Change: So I would say clearly there will be benefits, but we also have to look at it from not just the cost of the material by the elements around the currency piece as well so I think clearly growth in tequila and what we should see.

Speaker Change: As a favorable trend on the Cogs.

Speaker Change: Help on that operating leverage, but we're not relying solely on that and there's other elements like I talked about earlier in terms of self help so I won't break that down for you now, but as we get more guidance and color on 26 will give you some indications on broader cogs benefits absent mix.

Nick Hangeani: And there's other elements, like I talked about earlier in terms of self-help.

Nick Hangeani: So I won't break that down for you now, but as we give more guidance in color on 26, we'll give you some indications on broader cogs benefits, uh, uh, absent mix, and then obviously the cost save benefits, as we talked about as well.

Speaker Change: And then obviously the cost save benefits as we talked about as well.

Nick Hangeani: Corey, and just given your hedging on currencies, Nick, are you able to give us a feel for where you're landing on transactional FX tailwind or headwinds next year? So again, keep in mind, we typically are looking to get towards that 80% level for current year on, as in current year being 26. for transactional exposure. You know, clearly, we see that as a slight tailwind, so that will benefit us, but we'll give you more color on that as we get into 26.

Speaker Change: Got it and just given your hedging on currency a snake are you able to give us a feel for where you're landing on transactional ethics Telemundo headwinds fix here.

Speaker Change: So again keep in mind, we typically are looking to get towards that 80% level for current year on our agenda in 2006.

Speaker Change: For transactional exposure.

Speaker Change: Yeah, clearly, we see that as a slight tailwind so that will benefit us, but we'll give you more color on that as we get into 'twenty six and we'll also give you a little more color as I promised at the half year around how we are looking at broader transaction and translation.

Nick Hangeani: And we'll also give you a little more color, as I promised at the half year around how we are looking at broader transaction and translation risk as well going forward.

Speaker Change: Risk as well going forward.

Speaker Change: Okay.

Speaker Change: Got it thank you.

Speaker Change: Yeah.

Gen Cross: The next question is. and Gen Cross of BNP Paribas Exane.

Speaker Change: The next question is from Ken Krause BNP parabolic Shane Your line is now open. Please go ahead.

Gen Cross: Your line is now open, please go ahead. Good morning, everyone. Thank you for the question. So the H1 results, I think you referenced expecting to deliver strong market share performance in the second half. I just wonder if you give us a bit more color on how you see your competitive performance, particularly in the US and whether your expectation of strong market share performance remains in place. Thank you. Great. Yeah, so we, you know, we look at share on a yearly basis, on an annual basis, because we, you know, we are looking for quality share growth.

Speaker Change: Good morning, everyone and thank you for the question.

Speaker Change: So the H one results show that you referenced are expecting to deliver strong market share performance in the second half I was just wonder if you could give us bit more color on how you see your competitive performance, particularly in the U S and whether your expectation of strong market share performance remains in place. Thank you.

Speaker Change: Okay, great Yeah, and yeah. So we you know we look at share on a on a year on a yearly basis on an annual basis. Because we you know where we are looking for quality share growth and should not looking at it monthly periods, where you might see various promotions or other kind of elements come in and out with that.

Debra Crew: And so not looking at, you know, monthly periods where you might see various promotions or other kind of elements come in and out. With that said, I do feel very good on our fiscal year to date share performance. And, you know, and overall, that's being driven by our tequila portfolio, and specifically Don Julio. It's being driven by Crown. But also in the portfolio, we're seeing good performance on Kettle One. We've got good within category, you know, performance on Scotch with Johnny Walker and Ol' Parr within Gin on Tanqueray. So, you know, overall, I would say feeling good.

Speaker Change: That said I do feel very good on our fiscal year to date share performance and.

Speaker Change:

Speaker Change: And overall, clearly that's being driven by our tequila portfolio and specifically Don Julio is being driven by crown.

Speaker Change: But also in the portfolio, we're seeing good performance on kind of one we've got good within category, Yeah performance on Scotch with Johnnie Walker and old car within Gen. On tank right. So you know overall I would say feeling good clearly there's been some pressure of late and some of that you have to remember.

Debra Crew: Clearly, there's been some pressure of late, but some of that you have to remember, we are cycling the launch last year of Crown Blackberry, which did phenomenally well. It was a limited time offer and did so well, it actually sold out. So we're kind of lapping that initial launch period with a lot of merchandising. But it's, you know, we are where we would expect to be on that and feel good about delivering, you know, where we're at on share. Thank you.

Speaker Change: We are cycling the launch last year of Crown, a Blackberry, which did phenomenally well. It was a limited time offer in a digital world would actually sold out. So we're kind of lapping that initial launch period with a lot of merchandising them, but it's you know we are wherever you would expect to be on that end.

Speaker Change: Feel good about delivering them, you know where were at on share.

Speaker Change: Thank you thank.

Speaker Change: Thank you.

Edward Mundy: The next question is from Edward Mundy of Jeffreys.

Speaker Change: The next question is from Edward Mundy of Jefferies. Your line is now open. Please go ahead.

Edward Mundy: Edward, your line is now open, please go ahead. Morning, Debra, Nick and Sonya. So, one question for me, please. So, as you shift the operating model with some of these reshaped priorities, including this point on consistency of delivery, I was wondering whether this might be accompanied by an evolution in incentives, either short-term or long-term. If you look at your short-term or long-term incentives, there's quite a lot of stuff on organics and free cash flow conversion, and you're clearly signalling today hard cash flow targets. I was wondering how you're thinking about the overall incentive environment.

Speaker Change: Morning, Deborah Nichols Sonya said one question from me. Please so you should see operating motor with somebody's reshaped priorities.

Speaker Change: At this point on consistency consistency of delivery I was wondering whether this might be accompanied by an evolution incentive either short term or long term. If you look at your short term or long term incentive that's quite a lot of stuff on organics in free cash conversion in Europe, clearly signaling today.

Speaker Change: You'd have to hoard cash flow targets I was wondering sort of how you're thinking about they always rolled incentive.

Speaker Change: Environment.

Debra Crew: Yeah, thanks, Ed. And definitely we are looking at both short term and long term incentives, and we're reviewing those to make sure that they're very aligned with these transformation priorities. So more to come on that. And you'll, you know, you'll hear more about that as we move through the year and, you know, get to August. Great, thank you. Thank you.

Speaker Change: Yeah, I think that and definitely we are looking at them, both short term and long term incentives and wherever you are reviewing those to make sure that they are very aligned with these transformation priority so more to come on that and you'll you'll hear more about that as we lived through the year and you know get to August.

Speaker Change: Okay, great. Thank you. Thank you.

Fintan Ryan: The next question is from Fintan Ryan of Goodbody. Fintan, your line is now open, please go ahead. Good morning Debra, Nick, Sonya. One question for me please. I appreciate you've given a lot of color in terms of the potential headwinds around tariffs into the U.S.

Speaker Change: The next question is from Fintech Ryan of Goodbody then Tim Your line is now open. Please go ahead.

Speaker Change: Good morning, Deborah Nick Sanya and one question for me please.

Appreciate you are getting a lot of color in terms of the potential headwinds around tariffs into the U S. But clearly we've also.

Debra Crew: Clare, you've also, in recent weeks, got news about tariff reduction into India, give some colour in terms of your thinking about how you'll manage the imports of Scotch into the Indian market, how much you plan to pass on versus... and your own P&L. Thank you. Yeah, I mean, listen, as you would probably imagine, the whole agreement on the FDA is a huge achievement, and I think one that's been in the works for a while. So everybody feels really good around that. It's truly going to be transformational, I think, for Scotch and for Scotland. But, you know, ultimately, it's going to increase the quality and choice for the Indian consumer, which is critically important.

Speaker Change: In recent weeks got news about tariff reduction into India could you give some color in terms of your thinking about how you manage it.

Speaker Change: The importance of Scotch and into the engine markets, how much you plan to pass on versus.

Speaker Change: Take on your own P&L. Thank you.

Speaker Change: Yeah, I mean listen as you will probably imagine the whole agreement on the S. T is a huge achievement and I think one that's been in the works for a while so everybody feels really good around that.

Speaker Change: That is truly going to be transformational I think four four Scott and for often but ultimately is going to increase the quality and choice for the Indian consumer which is critically important and remember you know India is one of the world's largest and probably one of the most exciting whiskey market. So there's huge opportunity for growth.

Debra Crew: And remember, you know, India is one of the world's largest and probably one of the most exciting whiskey markets. So there's huge opportunity for growth.

Debra Crew: Now, keep in mind that this will take some time to embed into legislation. I think the belief right now is it'll come in through for 27. But, you know, we'll keep watching that. And so that will start flowing through. I think in conjunction with working with our friends at USL, you know, we do intend to pass that through to consumer pricing fully, right? That's the whole idea of being able to really, you know, drive more growth in what is an exciting category. So that, you know, if you look at that reduction of about 150 percent down to the 75 initially, that will enable probably a high single digit decrease in consumer price.

Speaker Change: Now keep in mind that this will take some time to embed into legislation and I think the belief right now is any covenants with some 27, but.

Speaker Change: Keep watching that and so that that stuff will start flowing through.

I think in conjunction with working with our friends at U S. L. A we do intend to pass that through to consumer pricing fleet right. That's the whole idea of being able to really.

Speaker Change: You know drive more growth and in what is an exciting category. So that if you look at that and reduction of about 115% down to the 75 initially that will enable will probably be a high single digit decrease in consumer price and we believe that should drive a similar high single.

Debra Crew: And we believe that should drive a similar high single digit percentage increase in volumes. Of course, you know, a lot of that will depend across categories of scotch in terms of, you know, bottles and origin versus bottles in India, et cetera. So those will be different. But that's kind of the broad sense on how we look at it. But clearly, the intent to pass through fully with that decrease in pricing and that increase in volume.

Speaker Change: Low digit percentage increase in volumes of course.

Speaker Change: Lot of that will depend across categories.

Speaker Change: In terms of you know Marshall.

Speaker Change: Marshals large investment button, India et cetera, so those would be different but that's kind of the broad sense.

Speaker Change: How we look at it but clearly the intends to Basel III fully with that decrease in pricing in that increase in volume.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Yeah.

Jeremy Fialko: The next question comes from Jeremy Fialko of HSBC. Jeremy, your line is now open, please go ahead. Hi, morning. Thanks for the questions.

Speaker Change: The next question comes from Jeremy Falco with HSBC Jeremy Your line is now open. Please go ahead.

Speaker Change: Hi, good morning, Thanks for the questions.

Jeremy Fialko: So the one for me is if we could focus a little bit more on Europe. So I guess when we strip out the good performance from Guinness, strip out the sort of inflationary growth you're getting in Turkey, it certainly does look like a pretty soft number from the kind of core spirit side.

Speaker Change: Works for me is if we could focus a little bit more on your so I guess when we strip out the good before was from Guinness a strip out the sort of inflationary grocery but in Turkey.

Speaker Change: It doesn't look like a pretty soft number for the kind of core spirit side.

Debra Crew: So could you perhaps go into a bit of detail on that market, what has caused that weakness, and also the extent to which the course was slightly depressed by the timing of Easter, what you think might shift back into Q4 due to when Easter was this year versus last year. Thank you.

Speaker Change: So could you bet scopes with bit of keto or is that market to kohl's.

Speaker Change: That weakness Russo.

Speaker Change: Step two which of course was slightly depressed by the timing of Easter what you think might shift back.

Speaker Change: Q4, two two.

Speaker Change: But east towards the CFS is gosh it effects.

Debra Crew: Yeah, so I'll, I'll start on Europe. I, you know, I mean, clearly Europe, so the Guinness performance, putting that aside, it, you know, it has been impacted by, you know, also consumer pressure and just uncertainty surrounding all the geopolitical conflict. And we are seeing that impact kind of in having some down trading on spirits. That being said, look, in GB we are seeing brands like Cosamigos do well, you know, in a tough market. We've got our non-alc portfolio doing well as well, particularly in places like Southern Europe. Southern Europe, by the way, is being, is working through a transition.

Speaker Change: Yeah, So I'll I'll start on on Europe, I, you know I mean, clearly Europe to begin his performance putting that aside and you know it has been impacted by you know also consumer pressure and just uncertainty surrounding geopolitical conflict.

Speaker Change: And we are seeing that impact kind of in and having some down trading on spirits.

Speaker Change: That being said look in G. D. We are seen as brands like consummated is doing well.

Speaker Change: You know in a tough market.

Speaker Change: We've got our non al portfolio are doing well as well, particularly in places like southern Europe and southern Europe by the way has been she is working through a transition if you remember in France, we've gone to a you know our own versus a JV there'll be we're operating through before.

Debra Crew: If you remember in France, we've gone to, you know, our own versus a JB that we were operating through before. And so they're still working through that. Northern Germany, and, you know, that is still soft, very similar to what we saw in H1. So, you know, price mix, we are seeing a downward pressure. It's hard to see because Guinness gives us such great price mix. You know, you see overall Europe showing very positive price mix, but we definitely are seeing down trading on the spirit side. Now we do have a very standard price portfolio within Europe.

Speaker Change: And so they're still working through that northern Germany and that is still a soft very similar to what we saw in each one.

Speaker Change: So price mix, we are seeing a downward pressure, it's hard to see because dentist gives us such great price mix. You know you see overall Europe, showing very positive price mix, but we definitely are seeing a down trading on the spirit side now we do have a very standard price portfolio within Europe. So.

Debra Crew: So, you know, we're having to navigate through that. But, you know, but no doubt that is one of the pieces of uncertainty that we're really feeling in the market as well. And part of the reason we're doing a lot of scenario planning for fiscal 26, you know, as we look at the recovery there for spirit.

Speaker Change: You know, we're having to navigate through that.

Speaker Change: But you know, but no doubt that as one of the pieces of uncertainty that we're really feeling in the market as well and part of the reason we're doing a lot of scenario planning for fiscal 'twenty six.

Speaker Change: You know as we look at the recovery there for spirits.

Debra Crew: and Edith Yorke-Easter. Yeah, I mean, Easter won't comment on that because it's not in the in the quarter. But you know, one thing about Q4 to remember much of our of our results from Q3 are going to reverse in Q4 because of some of these things we mentioned about the lapping of de-stocking and some of the, of course, the US pull forward. Okay, thanks. Thank you.

Speaker Change: And if you Wanna Easter that's all.

Speaker Change: Yeah, I mean, Easter won't comment on that because it's not in the again in the quarter.

Speaker Change: But you know what.

One thing about Q4, if you remember much of our of our results from Q3 are going to reverse in Q4 because of some of these things we've mentioned about the lapping of Destocking.

Speaker Change: Some of the of course, the U S pull forward.

Speaker Change: Okay. Thanks.

Speaker Change: <unk>.

Speaker Change: Okay.

Laurence Whyatt: The next question is from Laurence Whyatt of Barclays. Laurence, your line is now open, please go ahead. Morning, everyone. Could I ask one about Casamigos, please? I understand you've had it on your own distribution system for the best part of a year now. I think you would launch your new advertising campaign. And I think there was a little bit of price adjustment as well. Just wondering if the combination of those three changes are having much of an effect on what you're seeing with regard to consumer demand. Thank you very much.

Speaker Change: The next question is from Laurence spite of Barclays. Laurence Your line is now open. Please go ahead.

Speaker Change: Good morning, everyone could I ask one about a qassam egos piece I understand you've had it on your own distribution system for the best part of a year now I think we launched a new advertising campaign and I think that was a little bit of price adjustments as well I was just wondering if the combination of those three if our changes are having much of an effect on what youre, saying.

Speaker Change: With regard to consumer demand. Thank you very much.

Debra Crew: Yeah, we still have some work to do on on Cosamigos. Um, you know, what I would say is, is we're getting a lot of the pricing in throughout the market that has taken a while to get in because you literally have to work that kind of store by store. But we do feel like we're getting commercially, we've got, you know, the pricing is kind of finally getting to a place where we feel like it's priced right. The campaign is actually just launching. So we talked about it at Cagney, but it's literally just going into the market right now.

Speaker Change: Yeah, we still have some work to do on cost and he goes and you know what I would say is as we're getting a lot of the pricing them in throughout the market and that has taken a while to get yeah. Because you literally have to work that kind of store by store, but.

But we do feel like we're getting commercially we've got them you know the pricing is good.

Speaker Change: Finally, getting to a place where we feel like it is it is priced right.

Speaker Change: The campaign is actually just launching so we talked about it at cagny, but it's literally just going into the market right now.

Debra Crew: And as well as the RTD launch that we kind of flagged at Cagney as well. So we're looking forward to summer and seeing how that campaign performs and how the RTD does. We have very good selling against it. So, you know, more to come on that. But there's definitely more work to do. I will say outside of the U.S., we are seeing some positive momentum on Casamigos. And we still feel very good about the brand over the long run. But we just need to get awareness, you know, up again on the brand and, you know, and get it into, you know, that choice framework when consumers come to the shop.

Speaker Change: And as well as the RTD launch that we kind of flagged at Cagny as well. So we're looking forward to summer and seen how that campaign before them and how the RTD does we have very good selling against it. So you know more to come on that but there's there's definitely more work to do I will say outside of the U S. We are seeing.

Speaker Change: Some positive momentum on cost of meters and and we still feel very good about the brand over the long run, but we just need to get awareness you know up again on the brand and you know and get it into them that choice framework when consumers come to the shelf.

Laurence Whyatt: Understood. Thank you.

Speaker Change: Understood. Thank you do you think is a reasonable expectation to get it back into growth within the next fiscal year.

Debra Crew: Do you think it's a reasonable expectation to get it back into growth within next fiscal year? I mean, you know, look, certainly, we would like to see, you know, that happen. But that being said, we really need to, you know, this is going to be turning around a brand like this, where, you know, you've got to get momentum back, you know, if we're going to have to see how the campaign does. And, you know, and also how the market's doing. So you can't forget within tequila, even though we've made some price adjustments, we're still very much an ultra premium, we're in the ultra premium segment.

Speaker Change: I mean, you know look certainly we would like to see them you know that happened, but that being said, we really need to you know this is going to be turning around a brand like this where you know you've got to get momentum back you know if we're gonna have to see how the campaign size and you know and also how the market's doing chi.

Speaker Change: Don't forget with Engie chela, even though we've made some price adjustments, we're still very much an ultra premium where in the ultra premium segment.

Debra Crew: So, you know, it's quite a competitive environment out there. And, but we are wanting to build the brand back right as an ultra premium brand. And, and so that, you know, that takes time. And a lot of it's just going to be what we're seeing also competitively and in the industry. Anastasia, thank you very much.

Speaker Change: So you know, it's quite a competitive environment out there and then but we are wanting to build the brand back right as an ultra premium brand and and so that you know that takes time and a lot of it's just going to be what we're seeing and also competitively and in the industry.

Speaker Change: Understood. Thank you very much thank you.

Sarah Simon: Thank you. The next question comes from Sarah Simon of Morgan Stanley. Sarah, your line is now open, please go ahead. Yeah, morning. I've got two questions.

Sarah Simon: The next question comes from Sarah Simon of smoking Stanley Sara. Your line is now open. Please go ahead.

Sarah Simon: Yeah morning, I've got two questions first one on the supply chain agility program is that still ongoing or is that kind of morphed in to the new program.

Sarah Simon: First one, the supply chain agility programme, is that still ongoing or is that kind of morphed into the new programme? And then the second one was, Nick, you were talking about kind of substantial disposals. So, Is your free cash flow guidance on the basis of the portfolio today or is that kind of after allowing for some substantial, because obviously it's going to, I assume it's quite hard to give guidance based on a post-disposal profile, but if you just clarify that please. Yeah, I'll take that one real quick. Yeah, absolutely. It is pre any disposal. And obviously, as those happen, we'll be able to update that to you guys.

Sarah Simon: And then the second one was Nick you were talking about kind of substantial disposals. So.

Speaker Change: Is your free cash flow guidance on the basis of the portfolio today or is that kind of after allowing for some substantial because I say it but I assume it's quite hard to give guidance based on our post disposal.

Speaker Change: But if you could just clarify that please ask.

Speaker Change: Yeah, I'll take that one real quick yeah, absolutely. It is pre any disposals and obviously as those happen, we'll be able to update that.

Nick Hangeani: But you're absolutely right. Very hard to give you post disposal type of numbers at this point.

Speaker Change: To you guys, but yes.

Speaker Change: You're absolutely right very hard to give you post disposal type of numbers at this point.

Sonya Ghobrial: Yeah, and I'll take the the supply agility question. So look, we've had some different productivity numbers flying around and supply agility as well. And what was included in what, you know, isn't it came in and we talked about it the first half result, we stepped back and have recut and taken a, you know, a look across all of these programs, because some of these productivity things that were laid out and included. It's under very different macro conditions, you know, different growth expectations, different CAPEX expectations, et cetera. So we have recut, and as Nick mentioned earlier, as part of that 500, so the supply agility, the programs that are ongoing will be included in that.

Speaker Change: Yeah, and I'll take the they supply agility questions. So look we've had some different productivity numbers flying around and supply agility as well in what was included in what you know.

Speaker Change: Isn't it came in and he talked about as the first half results, we step back and have recast and taken.

Speaker Change: A look across all of these programs because some of these productivity and.

Speaker Change: Things that were laid out included it was under very different macro conditions.

Speaker Change: You know the different growth expectations different capex expectations et cetera. So we have re cut and as Nick mentioned earlier as part of that 500 to the supply agility.

Speaker Change: The programs that are ongoing will be included in that so we're trying to give better transparency to sort of one number that's all inclusive of all of these efforts.

Sonya Ghobrial: So we're trying to get better transparency to sort of one number that's all-inclusive of all of these efforts.

Sonya Ghobrial: Thanks.

Speaker Change: Thanks. Thank.

Operator: Thank you.

Speaker Change: Thank you.

Speaker Change: Your final question comes from Chris pitcher of Fred Thun Atlantic Chris. Your line is now open. Please go ahead.

Chris Pitcher: Final question comes from Chris Pitcher of Redburn Atlantic. Chris, your line is now open, please go ahead. Thank you very much. A couple of clarifications really from me. Just read that last comment about rolling the new cost savings programme into supply agility. If my memory serves me well, the supply agility was meant to deliver £2 billion of savings between fiscal 25 and fiscal 27. So then to have a £500 million savings programme either implies you... did a hell of a lot in fiscal 25 by Paul Ford, or actually the overall scope has perhaps reduced. So could you give us a feel perhaps how much is going to be delivered of the old supply chain in 2025?

Speaker Change: Thank you very much a couple of clarifications are ready for me I'm, just spray that last comment about rolling the new co.

Speaker Change: Cost savings programs to supply agility.

Speaker Change: If my memory serves me well the supply agility was meant to deliver.

Speaker Change: 2 billion of savings between fiscal 'twenty five in fiscal 'twenty seven so it doesn't have a 500 million savings program either employees.

Speaker Change: You've done a hell of a lot in fiscal 'twenty five.

Speaker Change: Are you pulling forward or actually the overall scope.

Speaker Change: Apps with Joost.

Speaker Change: So could you give us a feel of perhaps how much it's gonna pay effect delivered felt supply trailing 25, and then in terms of what Youre targeting I mean trade spend that's being targeted by Dr. Jacob.

Chris Pitcher: And then in terms of what you're targeting, I mean, trade spend is being targeted by Diageo for over a decade now, I think the system was called Polaris, which has been was being rolled out. How much of the reduced that by I think in dollars, it would be around four and a half billion in old money in terms of trade spend, how much, how much does that come down? How much more is there left to do? And therefore, when we're modelling it, it's more of a pricing benefit, or net pricing benefit than a than a sort of an EBIT margin bridge type benefit.

Speaker Change: For over a decade now I think I think the system is called Pelorus, which I think was being rolled out.

Speaker Change: How much have you reduced that by I think in dollars it would be around four and a half billion in old money in terms of trade spend how much how much does that come down how much more is there left to do and they are a women modeling it it's more of a pricing benefit or net pricing benefit.

Speaker Change: Then a sort of an EBIT margin bridge type benefit. Thank you.

Nick Hangeani: Thank you.

Nick Hangeani: I'll go ahead and just, you know, to clarify on the productivity program. So the two, that two billion number was sort of an all in productivity that included, so supply agility was a portion of that. It was never sort of the whole two billion and a lot of that supply agility did require, so remember our asset base has changed as well because we've done some asset lighting in Africa. There's also, there's capital that was involved in that supply agility. So, and of course, to your point, some things have also been delivered in fiscal 25. So this is why going all the way through it, Nick wanted to recut all of this and look at supply agility inclusive of some of these other efforts so that that way we didn't have multiple numbers flying around.

Speaker Change: And I'll go ahead, and just you know.

Speaker Change: Clarify on the productivity program, so that the the choose that 2 billion number was sort of an all in productivity that included to supply agility wasn't proportion of that it was never sort of be the whole 2 billion and a lot of that supply agility did require so remember our asset basis.

Speaker Change: Changed as well because we've done some asset lighting in Africa.

Speaker Change: And there's also there was capital that was involved in that supply agility, So and of course to your point. Some things have also been delivering in fiscal 'twenty five so.

Speaker Change: This is why going all the way through it and they wanted to rehash all of this and look at them supply agility inclusive of some.

Speaker Change: Some of these other efforts to that that way, we didnt have multiple numbers flying around in the neck. If you want to talk a little bit about trade.

Nick Hangeani: And then Nick, if you want to talk a little bit about trade or. Yeah, listen, Kristen, I'm going to be perfectly honest with you, I'm not going to be able to give you an indication of where things have come from over the last 10 years, right? Clearly, that is going to be a benefit to, as you rightfully said, the NSV number. Now, keep in mind, the number that's there is not always the level of addressable spend that you could go after because some of that is actually, you know, for lack of a better word, I'm going to say paper money.

Speaker Change: Or yeah listen of course wouldn't be perfectly honest with you I'm not going to be able to give you an indication of where things have come from over the last 10 years right.

Speaker Change: Clearly that is going to be a benefit too as you rightfully said.

Speaker Change: N S V number now keep in mind the number that is not always the level of addressable spend that she could go after because some of that is actually you know.

Speaker Change: A lack of better word I'm going to say the money. It's just about how you actually.

Nick Hangeani: It's just about how you actually, you know, invoice that, etc. So we will come back to you with more details around that. We do believe there's an opportunity that that's going to be a multi-year unlock. That's not in a single year, and that will be very much around, not necessarily so much that would just be absolute reduction, but how do you transition to a lot more in terms of paper performance type of measures. Now, you know, as you rightfully have said, I've been at previous companies, that is not something you just do in a single year.

Speaker Change: Invoice that excel.

Speaker Change: Et cetera, So we will come back to you with more details around that we do believe there's an opportunity that that's going to be a multiyear unlock.

Speaker Change: That's not in a single year and that will be very much around not necessarily so much that would just the absolute reduction, but how do you transition to a lot more in terms of People's performance.

Speaker Change: Measures are now you know as you rightfully said.

Speaker Change: I've been at previous companies that is not something you're just doing a single yeah, and it's a part of a broader negotiation in terms of what you expect as you speak to your trade customers and how you drive that in conjunction to with what we spend as a part of trade or commercial ANP in October.

Nick Hangeani: And it's a part of a broader negotiation in terms of what you expect as you speak to your trade customers and how you drive that in conjunction to with what we spend as a part of trade or commercial A&P in our total A&P number. So more to come on that, but we're confident that we can unlock value there. In addition to, like I said, the other elements of A&P spend as well, both on immediate scale and reach, as well as on the non-working slash development costs.

Speaker Change: A&P number so more to come on that but we are confident that we can unlock values that are in addition to like I said the other elements of our A&P spend as well both on media scale and reach as well as on the nonworking Slash development costs.

Speaker Change: Yeah.

Operator: Thank you very much and see you all later. Thanks Chris.

Speaker Change: Okay. Thank you very much and see you later.

Speaker Change: Thanks, Craig.

Debra: This concludes the Q&A session. So hung back to Debra crew for final closing remarks.

Debra Crew: And that concludes the Q&A session, so I'll hand back to Debra Crew for final and closing remarks. So thanks everyone for joining us today. I'm looking forward to sharing more on our Accelerate program will be next report results. I'm also looking forward to seeing some of you in Dublin tomorrow for our Guinness Deep Dive, which will also be webcast for those who can't make it online. As always, any further queries, please follow up with Sonya and the IR team. Have a good day.

Debra: So thanks, everyone for joining us today and looking forward to sharing more on our accelerate program will be next report results. I'm also looking forward to seeing some of you and download tomorrow for or against the di which will also be webcast for those who can't make it on.

Debra: Online as always any further queries, please follow up with Sanya and the IR team and a good day.

Operator: This concludes today's call. Thank you for joining.

Speaker Change: This concludes today's call. Thank you for joining you may now disconnect your lines.

Operator: You may now disconnect your line.

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