(Yicai) Feb. 26 -- While discussing Diageo’s interim results with analysts, Chief Executive Sir David Lewis said the UK drinks giant would not sell brands for less than they are worth, and Chief Financial Officer Manik Jhangiani described rumors the company may divest its Chinese baijiu business as “speculation."

In response to a question about Diageo’s ongoing strategic review and potential disposals on its earnings conference call yesterday, Lewis said: “We're not going to sell brands below fair value. If somebody were to approach us and make us an offer that we cannot refuse for portfolio assets, then as sensible businesspeople, we will obviously listen and engage with that.

“We are not actively out in the marketplace hawking a whole series of what people have called ‘tail brands,’ and nor are we active in a couple of things that you have speculated about,” he added.

Market talk about a potential sale of Chengdu-based Shui Jing Fang started after Diageo, whose brands also include Guinness, Johnnie Walker, Baileys, and Smirnoff, announced at the end of last year that it intends to divest some non-core assets.

“Just to be clear, we have never talked about that,” Jhangiani said about the rumors around a potential sale of SJF, a well-known baijiu brand. “That is speculation. And so I won't comment on that further,” he said. SJF has also denied the rumors in the past.

Baijiu is a fiery white spirit traditionally drunk at social gatherings, banquets, and celebrations in China, but demand has been softening in recent years, with younger drinkers shifting away from strong tipples, according to media reports.

“As Dave said, we have been clear, no fireside sale of any of these assets,” “We are not sellers, and that still stands,” Jhangiani said. “And more importantly, let the strategy first be laid out, and that will determine what we think about our brands and our portfolio going forward.

“We are not sellers, and that still stands,” he stressed.

But SJF may not be off limits, Shen Meng, executive director of Chanson Capital, told Yicai. Lewis did not rule out the possibility that Diageo may consider selling the business in the future, considering the opportunity cost of the slowdown in China’s liquor market, he noted, adding that the proceeds from a sale could be used to seek better returns elsewhere.

SJF announced last month that it expects net profit to have shrunk 71 percent to CNY390 million (USD57 million) last year on a 42 percent drop in revenue to CNY3 billion (USD440 million).

Diageo bought its first stake in SJF in December 2006 and later bought more. In 2019, Diageo became SJF’s controller with a direct stake of about 63 percent.

Diageo’s net sales fell 4 percent to USD10.5 billion in the six months ended Dec. 31 from a year earlier, its earnings report showed yesterday, mainly because of a weak performance in North America and China. Organic sales growth in North America and Asia-Pacific, including China, fell 6.8 percent and 11 percent, respectively.

Editors: Tang Shihua, Futura Costaglione