Diageo, the world's biggest alcoholic drinks group, said first quarter trading in was in line with targets, though market conditions in Europe were difficult.
Diageo - whose brands include Guinness, Smirnoff and Johnnie Walker - said in a trading update today ahead of its annual general meeting that it expected to see underlying sales rise 4% and operating profits 7% in its year to June 2006.
The group gained share in a growing North American spirits market, which accounts for a third of group sales, but it suffered tough trading in Europe -- nearly 40% of group sales - and expects volumes to fall this financial year due to lower sales of ready-to-drink products such as Smirnoff Ice.
Volume growth remains strong in its international region outside Europe and North America, with markets such as Korea, Taiwan and Nigeria recovering.
Chief Executive Paul Walsh said : 'the current oil price has led to higher costs for all consumer goods companies. Diageo is not immune to this, but our cost structure does reduce our exposure, and therefore we currently expect to contain these cost pressures within our overall guidance'.
Diageo added that the current strength of the dollar would trim its estimated hit from foreign exchange rates to £45 million for the year to June 2006 from the £50 million earlier estimated.
