Diageo says sales trends improved, foreign exchange hit worsened

LONDON, Sept 23 (Reuters) - Diageo (LSE: DGE.L - news) , the world's largest spirits company, said sales had risen so far in its new fiscal year, but that foreign exchange rates were increasingly eating into its operating profit.

The maker of Smirnoff vodka, Guinness beer and Johnnie Walker whisky said sales volume has grown by a mid single-digit rate, reflecting improved growth trends and an easy comparison with a year-earlier period that saw weak performance, particularly in the United States.

"The year has started well and performance is in line with our expectations," said Diageo Chief Executive Ivan Menezes in a statement on Wednesday.

Diageo North America expects first-half net sales to fall 2 percent, however, as comparisons get tougher.

At current rates, currency weakness should reduce Diageo's operating profit by 150 million pounds ($229.74 million) in fiscal 2016, compared with a prior forecast for a 100-million-pound hit.

Diageo shares were up 1 percent at 1732 pence at 0908 GMT. ($1 = 0.6529 pounds) (Reporting by Martinne Geller, editing by Louise Heavens)