LVMH, the French luxuy goods producer, today announced a 19% increase in first half operating income to €840m, compared to €708m in the same period last year.

The company said it wa particularly pleased with the result because of the "difficult environment, marked by slow economic growth and the persisting weakness of tourism."

Sales increased from €5,686m to €5,818m. Chairman and CEO Bernard Arnault said the results were led by the "very strong performance of the wines and spirits business."

During the period income for Champagne and wines increase by 44%, reflecting the return to normal sustained demand for Champagne and stocks at the distributor level returning to normal.

The company said its major brands, most notably Dom Perignon, has performed very well, particularly in the US and the UK.

Despite the continued difficult economic conditions, operating income in Cognac and spirits also rose, due to a good performance by Hennessy in the US. The company said that its acquisition of a stake in Millennium, owners of Belvedere and Chopin vodkas, would also create a new growth area.

Looking towards the end of year results, LVMH said that in a generally uncertain economic climate, the end of 2002 would be highlighted by a continued focus to increase cash flow, a decreasing of financial expenses, favourable currency hedging, new product launches and strategic store openings.

"Taking all of these elements into account, which should boost operating income growth during the second half, LVMH confirms its objective of a significant rebound in its 2002 operating income," the company said.