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Spirits maker Diageo says U.S. business ahead of expectations

·2-min read

(Reuters) - Diageo <DGE.L>, the world's largest spirits maker, said on Monday it has made a strong start to its fiscal year 2021, with many countries easing their COVID-19 restrictions and its U.S. business performing ahead of expectations.

"Our outlook for the first half of fiscal '21 has improved since the year-end, reflecting the good start to the year, particularly for our US business," CEO Ivan Menezes said in a statement ahead of the company's annual general meeting.

The company's shares jumped 6%.

Alcoholic drink makers have been hurt by the closure of bars and restaurants during the coronavirus pandemic. Sales have been helped by some reopening of venues and strong demand from people drinking at home.

The company's U.S. business - which represents about 45% of group profits, according to Barclays analysts, is performing ahead of expectations, helped by "resilient" demand and people increasingly choosing spirits over wine or beer.

It's "an encouraging start to the year," Barclays said.

Diageo cited the risk of additional restrictions in Europe, where infection rates are rising, and noted that in China, while bars and restaurants are recovering, large banquets - once a mainstay of Chinese spirits consumption - are returning more slowly.

Travel retail continues to be severely impacted, it said.

The maker of Johnnie Walker whisky and Smirnoff vodka said it continues to expect sequential improvement in organic net sales and operating profit compared to the second half of fiscal 2020, which ended on June 30. However, year on year, it expects lower sales and margins compared to the first half of fiscal 2020.

In August, Diageo reported an 8.4% drop in organic sales for the year, its worst performance in more than a decade.

(Reporting by Muvija M in Bengaluru and Martinne Geller in London; Editing by Ramakrishnan M. and Jason Neely)