Diageo Profits Rise But Outlook Cloudy

LONDON -- Diageo(DEO Quote), the world's largest producer and distributor of alcoholic drinks, said Thursday its profit for the last six months of 2008 rose 16.6%, but warned the impact of the global recession has intensified, clouding its earnings outlook.

The company reported a profit of 1.14 billion pounds ($1.63 billion), up from 975 billion pounds a year earlier, for the last half of the year, which is the first half of the company's fiscal year. Sales were up 18% to 6.7 billion pounds.

Diageo said the effects of the global economic downturn became more pronounced in November and December.

"Current economic trends indicate that consumer confidence will reduce further and the outlook for the second half is more difficult to predict," said CEO Paul Walsh. The second half refers to the first half of 2009 on the company's calendar.

The company said it was embarking on a restructuring plan, which would result in an exceptional charge of 200 million pounds.

Diageo toasted the success of Ketel One, a Dutch vodka brand which racked up 97 million pounds in sales -- all but 5 million pounds of that in North America -- and contributed 46 million pounds to operating profit.

The company paid $900 million last year to the Nolet Group, owners of Ketel One, for a 50% equity stake in the company and exclusive global rights to sell, market and distribute the product.

In North America, overall sales volumes increased 2%, and the company said it held onto its 30.4% share of a slowing market even though cutting its marketing spend by 6%.