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Guinness Maker Diageo Reports 10% Fall in Profits

Net profit dips to $1.59 billion while organic sales decline 2%.

Diageo, the world's biggest maker of alcoholic drinks, on Thursday reported a 10% drop in net profits during the first half of the company's financial year, hit by a weak economic environment.

The maker of Guinness, Baileys liquor and Smirnoff vodka said net profit fell 10.3% to to 1.016 billion pounds (US$1.590 billion) in the six months to Dec. 31 compared with the final six months of 2008.

"As we had anticipated, this was a challenging six months," Diageo CEO Paul Walsh said in the group's earnings statement. "The economic and consumer environment remained weak in many markets," he added.

Organic sales, which strip out the effect of acquisitions, disposals and currency effects, dropped 2% to 5.207 billion pounds in the first half.

Diageo said it was maintaining its guidance "for low single-digit organic operating profit growth for the full year."

Walsh said, "At a time when future economic and consumer trends continue to be difficult to forecast, the [cost-cutting] steps we have taken have created a stronger business which will position the company well."

"Recession in core markets of Europe and North America has impacted Diageo and led to its 2% volume decline in the six months between July and December 2009," said Jeremy Cunnington, an analyst at Euromonitor International. "In the U.S. the company has been hit by trading down from many of its global priority brands.

"Limited exposure to Asia-Pacific means that it has not benefitted as much from the strong growth and recovery in the region."

Copyright Agence France-Presse, 2010

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