UPDATE 1-Diageo sees profits growth on track, sales up

(Rewrites with further details)

LONDON, June 28 (Reuters) - Diageo Plc (DGE.L), the world's biggest alcoholic drinks group, has stuck to its forecast of an 8 percent rise in underlying operating profits for the year just ending, despite having seen an improvement in European sales growth in early 2007.

The British maker of Smirnoff vodka, Johnnie Walker whisky and Guinness beer said in a trading update on Thursday that due to improved sales in Europe and Asia-Pacific it expects underlying sales growth in the year ending on June 30 to be higher than its first-half rise of 6 percent.

But the higher than expected sales growth will be offset by a higher marketing spend and therefore its expected rise in operating profits stays at the 8 percent level forecast back at its first-half results in February.

"While Diageo's total organic net sales growth in the full year is expected to be higher than in the first half, operating profit growth will be in line with the first half performance of 8 percent," Chief Executive Paul Walsh said in a statement.

Diageo also reiterated that it has returned 1.4 billion pounds ($2.79 billion) to shareholders via a share buyback programme in the year to end-June 2007. The group said it expects exchange rates, mainly the weaker dollar, to trim 90 million pounds off operating profits in the current year, and to slice 40 million pounds off operating profit in its next year to end-June 2008.

It expects to publish its full-year results on Aug. 30.

((Reporting by David Jones; editing by Greg Mahlich; Reuters Messaging: david.jones.reuters.com@reuters.net; +44 20 7542 7972))

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