Whisky Sales Boost Guinness Maker Diageo's Shares

Diageo has reported a marked rise in profits in the year to June, as a robust demand for expensive whiskies and new spirits in the US helped offset sluggish growth in western Europe and some emerging markets.

The world's largest alcoholic drinks producer reported an 8% jump in pre-tax profit for the year ended 30 June to £3.53bn (€4.04bn , $5.36bn), compared with £3.18bn in 2012. Sales rose 5% to £11.43bn.

The maker of Guinness and Johnnie Walker is "on track" to meet its medium-term guidance. In 2011, Diageo said it would target organic sales growth of an average 6% in the "medium term" and widen its operating margin by 2 percentage points over three years.

Diageo's stock price shot up 4.4% on Wednesday morning in London and was trading 2.59% higher at 2041p at 1:32pm, valuing the company at around £51.30bn.

Sales in North America, the company's biggest market, increased 5%, buoyed by the sales of Crown Royal whiskey and Bulleit bourbon. Operating profit excluding some items shot up by 9%.

Sales declined 4% in the recession-hit western Europe region, where profits dropped 7%. Sales of the iconic Guinness dropped 5% in Ireland and 3% in the UK.

The Asia Pacific region reported a 3% increase in sales, although government measures in China pulled down domestic demand.

London-headquartered Diageo said that emerging market sales now account for 42% of the company's business and grew 11%, partly boosted by acquisitions.

The company also said its Johnnie Walker brand sold 20 million nine-litre cases in the year to June, doubling the number of cases over a decade. The scotch brand is now the most important spirit brand in the world by value.

"We have delivered 5% net sales growth, reflecting the strength of our US spirits business, and continued double-digit growth in the emerging markets, despite weakness in some markets" said chief executive Ivan Menezes.

"Price increases in each region, positive mix in North America and Latin America and the rigour we have in managing our cost of production and controlling our overheads drove significant expansion in operating margin,"

During the year Diageo completed the acquisition of Brazil's Ypioca and has increased its stake in China's Shuijingfang. It also acquired a 25.02% stake in USL, India's leading spirits company.

Cachaca is the most popular liquor in Brazil and Ypioca is the second-largest cachaca brand by value. Chengdu-based ShuiJingFang makes Baijiu, China's most popular alcoholic drink.