DB toasts 20pc profit growth

Strong sales of premium beer brands such as Heineken and Monteith's have translated into a double-digit annual profit increase for DB Breweries.

The NZ brewer, which was bought by Singapore's Asia Pacific Breweries last year, said its gains roughly equalled rival brewer Lion Nathan's decline.

DB's operating profit in the 12 months to September was S$55.3 million ($47 million), up 20 per cent on the previous year. Revenue was S$414.2 million, up 8 per cent.

Managing director Brian Blake said that without foreign exchange gains, which accounted for 6 per cent of operating profit, DB's profit before tax and interest was up about 14 per cent.

He noted that Lion Nathan's New Zealand operations suffered while DB enjoyed brisk business.

Despite this year's stronger profit, Blake said the brewing industry was set for "a tough year ahead" as it faced significant price rises on fuel and raw materials such as glass, aluminium cans and labels.

Lion Nathan's New Zealand operating profit declined 17.2 per cent to $75.7 million for the 2005 year, the Sydney-based brewer said last week.

It blamed severe price discounting at grocery stores and legislative changes such as December's smoking ban in pubs for the decline.

Lion Nathan's revenue excluding excise was $429.8, down nearly $37 million on the previous year.

Blake said that despite "aggressive discounting by Lion Nathan", DB had increased wholesale prices.

This move translated into "strong margin growth and a strong result", especially in the premium beer segment.

DB has 38 per cent of the country's total beer market. Lion Nathan has 51 per cent. Blake said the deep level of discounting instigated by Lion Nathan was unsustainable.

"In certain segments of the market we will match [Lion's discounts], but the market is getting to the stage now where the levels of discounting are becoming far too aggressive and totally contrary to returning a good profit result," he said.

Peter Kean, managing director of Lion Nathan's New Zealand unit, said the brewer had been discounting in the past three to six months in order to increase market share.

But he said yesterday that Lion Nathan's brands, including Lion Red and Speight's, had lost market share.

Since then, Lion Nathan had "aligned" its wholesale prices with competitors'.

Kean said the 2005 year was one of consolidation for the brewer.

With its diversified portfolio of beer, wine, spirits and ready-to-drink cocktails, Kean said, Lion Nathan was better positioned to weather a downturn in beer sales than DB, which sold only beer.