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Diageo toasts growth in Guinness sales

Drinks giant Diageo today toasted a return to growth for Guinness in the UK and Ireland. The company said the turnaround of the iconic pint in a declining beer market followed a major advertising push in the second half of 2007.

Guinness gained share to consolidate its position as the UK's number three beer brand as European sales volumes grew 3%, the company said.

Another strong performance from spirits such as Johnnie Walker whisky and Smirnoff vodka helped Diageo lift pre-tax profits to £1.37 billion in the six months to December 31 - 5% ahead of the previous year and in line with market expectations.

The company was also confident over its full-year performance today, despite fears over potential headwinds from a US slowdown and the UK smoking ban.

Chief executive Paul Walsh said: "While we continue to watch for any impact that recent financial market volatility may have on broader trading conditions, we are maintaining our guidance for the current year."

As well as the recovery of Guinness, Diageo said Baileys and Smirnoff benefited from increased marketing spending and a new Christmas pricing strategy.

The company is also pushing key brands in other fast-growing markets such as Eastern Europe and Russia, offsetting weaker sales in Spain and Greece. Across Europe, operating profits rose 2% to £509 million.

In the US, a weaker dollar against the pound hit the business although underlying operating profits were 7% higher at £491 million after raising the prices of its spirits, which also include Captain Morgan rum.

The company also hopes its geographical spread will protect it from any potential slowdown. It highlighted growing scotch sales in Latin America and the Middle East, and is moving into new Asian markets such as Vietnam.

It is looking to protect itself from declining beer markets in the UK by increasing its presence among "super-premium" products, such as last week's deal to buy a 50% stake in Dutch vodka brand Ketel One.