DIAGEO has declared that anti-extravagance measures in China and deepening economic challenges in Russia are continuing to limit global demand for premium spirits.

The Scotch whisky giant cited a range of political and economic challenges as it posted a 0.5 per cent fall in first half reported sales to £5.9 billion - below analysts' average estimate of £6bn.

The Bell's and Johnnie Walker maker said sales had fallen by 0.1 per cent on an organic basis, with the volume of beer and spirits sold down two per cent in the six months ended Wednesday, December 31. Operating profits dipped by 11 per cent to £1.8bn, before exceptional items.

Johnnie Walker was found to have suffered the most from the fall in volumes in the Far East and the West Latin America and Caribbean region.

Net sales of the brand fell by 12 per cent amid moves to reduce stock levels by customers in China, amid the continuing crackdown on conspicuous gift giving.

Scotland's biggest Scotch whisky producer also suffered from the strength of the pound against currencies such as the Venezuelan bolivar, Russian rouble and euro.

Demand in Russia, which accounts for two per cent of sales, was also depressed by sanctions imposed by the EU and the US for its role in the Ukraine crisis.

John Kennedy, Diageo's Europe president, said: "If you look at Scotch overall it has been a pretty weak six months. We have about 60 per cent of our Scotch sales in emerging markets and there has been more volatility and de-stocking that has had an impact during that period.

"However, that's a cyclical piece.

"Structurally there is huge potential in Scotch, particularly if you look at the emerging markers."

Diageo has previously admitted to revising the timetable of its Scotch whisky expansion plans in light of slower growth in emerging markets.

Asked if there was any update on those plans, Mr Kennedy said: "Overall it is proceeding at the pace we'd originally planned.

"As you imagine when you are laying down aged stock you are constantly taking a read on what is going up, what is going down.

"We monitor it, but it is proceeding well and we think we are setting ourselves up well for long-term supply."

In addition to political and currency instability, Diageo pointed to subdued economic conditions in the US and western Europe, where the recovery has yet to fully filter through into consumer behaviour.

However the company, whose brands include Guinness, Smirnoff and Bailey's, said its luxury Reserve brands division had seen a net sales increase of 10 per cent.

It also highlighted encouraging signs in India, where it completed the integration of United Spirits Limited over the period, and in Mexico, where it acquired Tequila house Don Julio.

And Mr Kennedy, who noted "positive trends" in Turkey. said Diageo's position in western Europe was "stable and improving", noting that markets such as France, Italy, Ireland and Britain were now in growth after difficult times.

Sales were up two per cent in Britain, he said, driven by 50 per cent growth in its Reserve or luxury brands including Haig, the whisky marketed by David Beckham, and Ciroc vodka.

Mulling the company's performance, Mr Kennedy said: "Overall what we have seen is a pick-up in momentum in the last six months .

"We had an improving trend for the global business between the first quarter and the second quarter driven by a standout performance by the Reserve or luxury portfolio and our innovation pipelines, which showed a lot of year on year growth.

"When you got down to the bottom line we improved the operating margin and had a step up in cash flow."

Diageo declared an interim dividend of 21.5p per share, up nine per cent. Shares closed up 60.5p at 2022.5p.