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Diageo profit up after 'rocky' emerging market ride

Diageo remains confident about China despite a slowdown in growth in the world's second-biggest economy as the spirits group reported 18 percent growth in operating profit in emerging markets.

"There's no question the dynamics in China have slowed down but our overall business is up 8 percent in China. We're very pleased with the momentum we've got in our super deluxe scotch whiskey business there, it's actually up 44 percent," Chief Executive Ivan Menezes told CNBC.

Menezes said that emerging markets had been a "rocky ride", but he was pleased with the group's full-year earnings. Diageo hiked its dividend by 9 percent and confirmed its medium-term outlook.

Net sales rose 5 percent year-on-year for the group, whose brands include Guinness, Johnnie Walker and Baileys. Operating profit before exceptional items was up 8 percent. Diageo shares were down 1.85 percent in early trade.

Menezes, who took up the role of chief executive in July, said sales were up in both developed and emerging markets, despite a difficult economic situation. Emerging market net sales accounted for 42 percent of Diageo's business.

The United States was a "huge area of strength", Menezes said. The group saw 8 percent net sales growth in U.S. spirits. Net sales in beer declined 1 percent.

"I love our North American business" he said. "It's very well positioned for the demographics in that market place. Spirits are growing and premiumizing and today generate over 40 percent of our profits. This is a real engine for growth for us."

Western Europe continued to be a "challenging trading environment," the group said in a statement, though trading in the U.K., where the group is based, was "resilient".

Despite Europe's difficulties, Menezes said the company was in it for the "long haul" in the region.

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