Diageo profit growth slows on rising costs

Diageo Plc, the world's largest liquor maker, reported slowing profit growth on higher costs for oil and barley and lower consumer spending in Europe and North America.

Net income in the year ended June 30 rose 2.1 percent to 1.52 billion pounds, or 58.9 pence a share, from 1.49 billion pounds, or 55 pence, a year earlier, London-based Diageo said yesterday in a statement.

The maker of Smirnoff vodka and Guinness stout said it expects operating profit in fiscal 2009 to gain 7 percent to 9 percent, excluding acquisitions and currency movements, compared with growth of 9 percent in the prior year. Rising commodity costs may halt margin expansion, Chief Financial Officer Nick Rose said in May. Diageo increased marketing spending 5 percent in the year to keep sales growing amid concern that the economy in the United States, its most profitable market, may enter a recession.