Business

Diageo, the maker of Johnnie Walker whisky, Smirnoff vodka and Guinness beer, said it faces a "challenging" market and forecasts accelerating input costs from the rising price of grains, glass, packaging and energy.

Pre-tax profit slipped to £2.093bn in the 12 months to 30 June, from £2.095bn during the same period a year earlier. Operating profit increased to £2.2bn from £2.1bn.

Total net sales rose 7% to £8.1bn.

The main driver of growth came from the International division, where scotch in Latin America and beer in Africa drove net sales growth of 16%. In North America, the growth of Smirnoff and Captain Morgan produced a 5% sales increase.

Eastern Europe and Russia contributed more than two-thirds of net sales growth in Europe, and "strong volume growth" in the UK, driven by Smirnoff and Baileys, generated nearly 20% of the region's sales growth. However, operating profit fell by £3m to £720m.

Diageo introduced a new bottle, packaging and labelling for the three flavours of Baileys cream liqueur in July.

Diageo chief executive Paul Walsh said the firm entered the new financial year facing "slowing global GDP growth and more challenging global economic trends".

However, he felt that the strength and diversity of Diageo's business meant it could deliver organic operating profit growth for the year to June 2009 "within our range of 7-9%".