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London (pte025/07.07.2005/12:29) - The world's largest liquor company Diageo Plc http://www.diageo.com announced that sales growth has slowed this year, due to declining consumption in Europe.
A spokeswoman for Diageo Isabelle Thomas said that the company won't release its annual earnings or volume of liquor sold until September, but shares of the company fell as much as 5.2 per cent, the most in two-and-a-half years. Diageo's stock was down 41.5 pence at 797 pence early this morning in London.
Diageo said in a statement that net sales in Europe had fallen in the second half by more than the one per cent posted in the first. "The consumer environment throughout Europe has worsened,'' the company said.
Diageo, which makes Smirnoff vodka and Guinness stout, is refocusing on the US, where spirits are gaining popularity. One third of its operating profit is, however, made in Europe.
"Europe remains the toughest geographic area,'' said Michael Bleakley, an analyst at Credit Suisse First Boston in the U.K. capital, CSFB has an 'outperform' recommendation on Diageo.
Europeans are spending less time and money in bars, due to smoking bans in pubs in Italy, Norway and Ireland. Concern about unemployment and record oil prices are also probable causes for money-saving on alcohol consumption. Retail sales in the euro zone declined for the fifth month out of six in June.
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