Drinks group Diageo met forecasts today with a 10 per cent rise in annual earnings but cut its profit target for this year due to concerns about the strength of any recovery.
The London-based maker of Smirnoff vodka, Johnnie Walker whisky and Guinness beer posted basic earnings for the year to end-June of 65.2 pence a share.
The British group saw annual underlying sales flat, but the weak pound and cost cutting pushed operating profit up 4 per cent, at the bottom of its 4 to 6 per cent growth range.
Diageo, which cut this target from 7 to 9 per cent only in February due to weak European demand and destocking in the United States, again reset the target to low single digit percentage growth for the current year to June 2010.
The company said it would increase its final dividend 5 per cent to 22.2 pence.
"While the global economy appears to be stabilising, there is still uncertainty as to the sustainability and pace of any recovery and (the current year) will be challenging, as we lap a strong first quarter and a reasonable first-half performance this year," said chief executive Paul Walsh in a statement.
"That being recognised, we expect to deliver low single-digit organic operating profit growth in fiscal 2010," he said.
Diageo has seen sales growth shudder to a halt then tip downwards over the year as the downturn hit drinkers in countries such as Spain, Ireland, and Russia, while profit growth slowed as consumers turned to cheaper drinks.
Diageo shares have underperformed the FTSE 100 by 6 per cent so far this year, but have risen from a low of 727p in March to close yesterday at 996-1/2p. They have outperformed rival Pernod Ricard by 7 per cent in 2009.