[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Thursday, 7 July, 2005, 07:40 GMT 08:40 UK
Diageo's European market worsens
Smirnoff mule
Diageo owns some of the best-known brands of drink
Diageo, the world's biggest spirits company, has said it is still facing problems in European markets.

The firm, which makes Guinness beer and Smirnoff vodka, said sales in Europe are likely to have worsened during the second half of its financial year

Markets such as Nigeria and Korea are experiencing problems as well.

Diageo also said it expects to increase its compensation payments to the Thalidomide Trust to an annual 6.5m and hopes to agree the deal this year.

Future compensation

Thalidomide, a drug used to combat morning sickness in pregnant women but which caused birth defects, was originally distributed in the UK by a pharmaceutical subsidiary of the Distillers Company.

Distillers, the company which marketed the drug, was owned by Guinness, which after a merger became part of Diageo.

Diageo said it expects to finalise the agreement with the trust by the end of this year and will make the annual payments until 2037.

As a result the company is set to take an exceptional operating profit charge of about 150m in the year ended 30 June 2005 to cover the cost of the future compensation.

Diageo said that volume growth in the new financial year is likely to be little changed from the previous one.

It will focus on cost cutting, reorganisation and price increases in its strong US market to help drive operating profit growth.

The main area of concern is Europe, however, where the consumer environment has "worsened".

European "net sales, which were down 1% in the first half, are therefore likely to be down further in the second half," Diageo said.

Those blips have been partly offset by the strong performance of Diageo's international business, in particular Latin America, Brazil, Russian, India and China, the company said.


SEE ALSO:
Diageo to buy US winemaking firm
20 Dec 04 |  Business
Diageo says Cheerio to US stake
05 Oct 04 |  Business
Dollar slide hits Diageo revenue
02 Sep 04 |  Business
Diageo attacked over whisky cuts
23 Jul 04 |  Scotland


RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific