STRONG sales of Diageo's top-end whisky brands in China were not enough to prevent continued stagnation in revenues from the previously buoyant Asia region in the first quarter of its financial year.
With rising demand for its spirits brands in North America offsetting a decline in Europe, the maker of Johnnie Walker whisky posted a 3% rise in organic net revenue for the three months to the end of September.
This was weaker than the 4% increase the City expected and lagged the group's 6% medium-term growth target.
Ivan Menezes, chief executive of Diageo, said: "Our performance in the quarter was good, given weakness in some markets."
He said that the strength of its biggest business, US spirits, "underpinned our performance".
While it is seeing "slightly improving trends" in Western Europe, he said that the group still expects a low single digit net sales decline for the full year.
He said the company remains committed to its medium-term target.
Diageo has continued to be hit by a clampdown on conspicuous consumption in China.
This led to a "substantial fall in net sales" at its white spirit subsidiary despite continued strong growth of its super and ultra-premium Scotch brands, which include Windsor.
This meant that sales growth in Asia Pacific amounted to 0.6%, despite improved performance in Korea and India, where Diageo recently secured control of Vijay Mallya's United Spirits business.
Diageo reported a 5.1% year-on-year rise in sales in North America for the period.
In Western Europe, where whisky brand J&B has historically been strong, sales were down by 1.1% as the region struggled to emerge from the economic downturn. This was despite restocking in the large whisky market of France.
In Latin America and the Caribbean, sales were up 10.9%, a weaker outcome than many expected due to weak demand in markets such as Colombia.
Africa, Eastern Europe and Turkey recorded a rise of just 1.3% in sales. Africa, seen as a key potential market by Diageo, recorded sales growth of just 5% following weaker trading in Nigeria and Ghana.
Shore Capital analyst Phil Carroll said it was a "subdued performance" that could lead to downgrades of market expectations.
Diageo's shares closed up 16p or 0.8% at 1954p.
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