Drinks group Diageo saw modest sales growth in the final six months of last year as challenging economic conditions in Europe weighed on the business.

Organic sales, which excludes the effect of acquisitions and currency swings, gained 4 per cent, missing a 4.5 per cent median estimate of 11 analysts surveyed by Bloomberg News.

Growth in its international and Asia Pacific markets was offset by continued weakness in Europe, particularly in Greece, Iberia and Ireland, where net sales declined 13 per cent. Ireland played a key role in a 4 per cent decline in net sales of Diageo's beer brands, where weakness in the on trade, particularly in rural areas, saw sales of Guinness decline.

Net sales of Diageo's products in Britain were up 1 per cent, but margins were eroded, and Russia and Eastern Europe saw net sales improve 20 per cent.

Overall, its international and Asia Pacific units showed a rise in volume of 9 per cent and 8 per cent respectively. European volumes contracted by 2 per cent and net sales dipped by 3 per cent. In North America, volume rose 2 per cent, while net sales were up 3 per cent.

Organic operating profit rose 2 per cent, but missed a 6.5 per cent median estimate. Net income rose to £1.19 billion in the period.

Diageo chief executive Paul Walsh said momentum was building in the business.

"Our top line performance was stronger and price/mix improved. We have increased marketing spend significantly, up 10 per cent, but in a very focused way. Thirty-five per cent of the increase was behind strategic brands in US spirits to build the brand equity as we move away from promotional support and over 60 per cent of the increase was on our brands in the faster growing emerging markets," he said.

"Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010."

Additional reporting: Bloomberg