City File: Scotch sales drain Guinness profits: City File

GUINNESS, the drinks giant, is facing its first profits downturn since Ernest Saunders became managing director in the early 1980s. Full-year figures to be announced on Thursday are expected to show profits falling from pounds 956m to pounds 795m. Much of the damage is due to a previously flagged pounds 125m extraordinary provision, but trading profits have slipped badly, undermined by destocking in Japan and a near collapse in British sales of scotch. Has Guinness gone ex- growth for good, or is this just a temporary, recession-inspired setback? With the big international brands still accounting for just 7 per cent of the world spirits market, there is plenty of scope for expansion at Guinness. However, the bad news may not yet be fully reflected in the share price. Avoid for now.