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Diageo drinks up profit
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September 6, 2001: 4:19 a.m. ET
Growth in key spirits brands powers rising profit at giant UK drinks company
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LONDON (CNN) - Rising sales of Smirnoff vodka and Baileys creamy liqueur helped world No. 1 spirits company Diageo post a 14 percent jump in annual profit.
The British company is focusing it efforts on generating growth from eight global drinks brands, including Johnnie Walker whisky, Guinness beer and Malibu. It is selling the Burger King chain and bakery unit Pillsbury.
Profit after tax rose to £1.45 billion ($2.1 billion), or 42.8 pence a share, excluding one-time items, from £1.26 billion, or 37.2p a share, a year ago. Sales rose five percent to £12.8 billion.
"Since the start of the new financial year the key drivers of performance have remained unchanged," said Chief Executive Paul Walsh. "In premium drinks, top line growth ... has been maintained despite some weakening of economic conditions."
Walsh told CNN the company now owned eight of the world's top 25 spirits brands, but stressed that these still represent less than 10 percent of the global market.
"This offers huge opportunity to grow, with new brands such as Smirnoff Ice," said Walsh.
Diageo said pre-tax profit before exceptionals and goodwill amortisation rose to £1.98 billion ($2.88 billion) for the year to June 30. That was in line with forecasts of analysts polled by Reuters, who estimated underlying pre-tax profit of £1.97 billion to £2 billion.
Walsh said the company expected hear whether U.S. regulators would approve of its $10.5 billion sale of Pillsbury to General Mills (GIS: Research, Estimates) before October, and hoped to get clearance for its joint $8 billion acquisition of Seagram Co.'s (VO: Research, Estimates) drinks unit next month.
Meantime, the sale of Burger King, the world's second-biggest fast-food chain, is expected to go ahead although the company has set no timeframe.
"Burger King's operating income declined 12 percent," Walsh said. "But it's important to remember that represents just 6 percent of total operating profit. Separation from Diageo is still on, although there is no timetable."
The company's stock fell 1.6 percent to 695 pence in early London trading on Thursday.
Amid steeply tumbling share prices in many sectors of world stock markets, the shares have held up relatively well this year, shedding only 5 percent of their value in 2001. The stock reached 798 pence in July, its high point for the year. 
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