Lower sales of ready-to-drink products hit Diageo earlier in the year

Full year pre-tax profits at the firm jumped to �2.156bn ($3.38bn) for the year to June 30, largely in line with market forecasts of �2.08-2.19bn.

The firm, which makes Smirnoff vodka, Johnnie Walker scotch and Guinness beer, said trading had improved in North America, Britain and Spain.

It also saw a 45% increase in sales of Pimm's in the UK, during the recent hot spell.

But the company warned it faced tough trading in Ireland for its beer business and in Latin America from currency and political upheavals.

Chief executive Paul Walsh said: "There are signs that things are starting to improve, but it is too early to call it a broadly based recovery.

"We are optimistic but cautious."

He added he saw no trading improvement in Ireland and Latin America this financial year.

The firm suffered difficult conditions in the early months of the year, blaming the Iraq war, the Sars outbreak and a general slowdown in consumer spending.

Sales of its ready-to-drink products in the US and UK suffered as a result, it said.