Diageo hit by weak European markets

Diageo says that strong trading in emerging markets helped offset “weaker” sales in Western Europe in the first-half of its financial year.

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The Guinness, Smirnoff and Gordon’s maker says operating profit increased 2% to £1.7bn in the six months to 31 December. Net sales increased 4% globally in the period to total £5.3bn.

European sales, however, slipped 3%, hit by “challenging economic conditions” in Western European countries such as Ireland, Spain and Greece.

Conversely, sales in developing regions increased 13%, while returns from Asia-Pacific were up 7%.

The company has increased marketing spend in emerging economies to exploit growth potential. Investment increased 18% internationally and by 10% in Asia-Pacific but fell 9% in Europe. Spend was also up 12% in North America.

Paul Walsh, chief executive of Diageo, says: “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”.

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