Diageo sees interim sales top up

The drinks giant is Scotlands biggest distiller. Picture: Diageo
The drinks giant is Scotlands biggest distiller. Picture: Diageo
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Sales driven by increased spending on marketing helped Scotland's biggest distiller Diageo report better-than-expected first-half results.

But the maker of Johnnie Walker Scotch and Smirnoff vodka said foreign exchange rates would take a bigger-than-expected gulp out of sales and profits in the full year, due to a strengthening sterling and weak US dollar.

Diageo said organic net sales grew 4.2 percent in the six months ended in December, above what analysts said was a 3.7 percent consensus.

The company said marketing spend rose 7 percent in the period, as it works to improve performance of Scotch, its key product, and vodka in the US, which has been weak.

But like rivals it has benefited from the current popularity of cocktails, as spirits gains market share from beer.

Like many global packaged goods companies, Diageo has adopted a plan of cost-cutting that has helped make its business more efficient, providing funds to use for generating sales.

“Diageo is a business in change,” said Jefferies analysts, citing its new chairman, Javier Ferran, and a perceived threat of a possible takeover by companies associated with private equity firm 3G. “We see a perfect blend of productivity and top-line growth.”