Guinness maker Diageo sees interim net profits jump

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Diageo, the world's biggest producer of alcoholic drinks, posted an 18-percent rise in first-half net profits on Thursday, but warned of tough trading conditions in Europe.

Net profits leapt to £1.194 billion (1.404 billion euros, $1.917 billion) during the group's first half, or six months to the end of December, Diageo said in a results statement.

The British brewing giant, which makes Guinness stout, Baileys liqueur, Johnnie Walker whisky and Smirnoff vodka, said the figure compared with profit after tax of £1.016 billion during the first half of 2009/10.

"Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010," said chief executive Paul Walsh.

Total sales of its products, which also include Blossom Hill wine, Captain Morgan rum and Jose Cuervo tequila, increased by two percent to £5.32 billion.

The company added that economic pressures in Greece, Portugal and Spain, and to a lesser extent in Ireland, led to a 13-percent drop in sales across those markets.

But sales grew 20 percent in Russia and the rest of Eastern Europe "as a result of the improving economic situation and strong growth of imported spirits," Diageo noted in its earnings statement.

In afternoon London deals, the group's share price sank by 4.31 percent to 1,119 pence, as investors digested the results.

Jeremy Cunnington, alcoholic drinks analyst at Euromonitor, said that the brewer's performance reflected the state of the markets in which the group operates.

"Diageo's results reflect the general global economic conditions with strong growth in emerging market regions, slow recovery in North America and a terrible performance in Western Europe, driven by southern European markets such as Greece," Cunnington said.

"Diageo's global performance is weaker than it should be, being hit by its reliance on the slow recovering North America and overexposure in troubled markets in Europe such as Spain, Greece and Ireland.

"While it has benefited from a comparatively strong position in certain emerging market regions, such as Latin America, its weakness in the booming Asia Pacific region has held back its global performance."

© 2011 AFP

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