**Diageo Fiscal 26 Q1 Trading Statement Summary**
**Key Highlights**
**Flat Organic Net Sales Growth** Diageo reported flat organic net sales growth in Q1 FY26 (ended 30 September 2025), with a 2.9% increase in volume offset by a 2.8% decline in price/mix. Reported net sales declined by 2.2% to $4.9 billion, primarily due to disposals and negligible foreign exchange impact.
**Regional Performance**
**Strengths** Growth in Europe, Latin America, and Caribbean (LAC), and Africa offset by weakness in Asia Pacific (APAC) and North America (NAM).
**Weaknesses** Chinese white spirits (CWS) in China and softer US consumer environment negatively impacted results. CWS weakness alone reduced group net sales by ~2.5%.
**Strategic Focus** Diageo is advancing its **Accelerate programme**, aiming for $625 million in cost savings over three years. The program focuses on agility, cost efficiency, and leveraging AI for better analytics.
**Fiscal 26 Outlook**
Organic net sales growth expected to be **flat to slightly down**, including impacts from CWS and US consumer softness.
Organic operating profit growth projected at **low to mid-single digit**, supported by cost savings.
Free cash flow target maintained at **~$3 billion**, with expectations of growth in future years.
**Management Commentary** Interim CEO Nik Jhangiani emphasized adapting to evolving consumer trends, strengthening commercial execution, and embedding a performance-driven culture.
**Regional Breakdown**
1. **North America (38% of net sales)** Organic net sales declined 2.7% due to softer spirits market, competitive pressure in tequila, and weak consumer confidence.
2. **Europe (25% of net sales)** Organic net sales grew 3.5%, driven by Guinness and strong performance in Tรผrkiye.
3. **Asia Pacific (18% of net sales)** Organic net sales declined 7.5%, primarily due to CWS weakness in China, partially offset by growth in India.
4. **LAC (11% of net sales)** Organic net sales grew 10.9%, led by Brazilโs double-digit growth.
5. **Africa (8% of net sales)** Organic net sales grew 8.9%, with strong performance in East and South Africa.
**Key Initiatives**
**Accelerate Programme** Progressing well, with focus on cost efficiency, AI-driven analytics, and process simplifications.
**Disposals** Completed sales of Seychelles Breweries, Guinness Ghana Breweries, and Diageo Operations Italy S.p.A. to streamline operations.
**Financial Guidance**
Tax rate expected at ~25%, effective interest rate at ~4.0%, and capital expenditure at the lower end of $1.2-$1.3 billion.
Leverage ratio target of 2.5-3.0x net debt to adjusted EBITDA to be achieved by FY28.
**Conclusion**
Diageoโs Q1 FY26 results reflect challenges in China and the US but highlight resilience in other regions. The company remains focused on strategic initiatives to drive growth, improve efficiency, and deliver on financial commitments.
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### Notes:
1. **Net Sales**: Reported net sales declined by 2.2% YoY, while organic net sales growth was flat.
2. **Volume**: Organic volume growth was 2.9%.
3. **Price/Mix**: Organic price/mix declined by 2.8%.
4. **Free Cash Flow**: Expected to increase to $3 billion in F26 from $2.7 billion in F25.
5. **Capital Expenditure**: Expected to be at the lower end of $1.2-1.3 billion in F26 compared to $1.5 billion in F25.
6. **Effective Interest Rate**: Slightly decreased to 4.0% in F26 from 4.1% in F25.
7. **Tax Rate**: Expected to be around 25.0% in F26 compared to 24.9% in F25.
8. **Net Debt to Adjusted EBITDA**: Target is to be within 2.5-3.0x by F28. This table provides a clear comparison of key financial metrics and debt-related figures between F26 (2025) and F25 (2024).