Holidays law hurts brewer's NZ profit

Lion Nathan says its sales in New Zealand will be up to 18 per cent lower, which it blames on the Holidays Act. Picture / Richard Robinson

SYDNEY - New rules around holidays are biting into brewing profits.

Australasian brewer Lion Nathan said yesterday it was on track to achieve a net profit from operations of between A$230 million ($252 million) and A$235 million for the 2005 financial year.

But it said full-year trading profit from operations in the New Zealand business was expected to be up to 18 per cent lower than in the previous year, in a range of $75 million to $80 million.

"This is attributable to continued weakness in on-premise trading, which is adversely impacted by legislative changes and a very competitive pricing environment for packaged beer," the company said.

New Zealand beer volumes for the quarter were ahead of the same period last year but were down by 5 per cent in the year to date as the introduction of the Holidays Act led to slower sales.

The act requires employers to pay workers more on statutory holidays, and some owners closed rather than raise prices.

"While the expected New Zealand full-year result is disappointing, we take heart from recent performance improvements," chief executive officer Rob Murray said.

Wine volumes were stable on a year-to-date basis, with strong demand for Wither Hills and growth in the New Zealand wine distribution business offset by a decline in Australian wine volumes.

"The performance of our Australian beer business has improved over the year and while the New Zealand beer market remains challenging, it is pleasing to confirm our previous guidance of full-year NPAT [net profit after tax] from operations of between A$230 and A$235 million," Murray said.

"This is prior to the impact of previously announced one-time costs relating to the Two Dogs product recall of A$5.8 million and other fourth-quarter one-time charges."

Lion Nathan said total beer volumes for the group were flat for the third quarter at 188 million litres, excluding licensed XXXX volume in Britain and the discontinued China business.

"Australian beer volumes were marginally ahead of the same quarter last year, but on a year to date basis were slightly lower, reflecting lower overall market volume decline," the company said.

"The impact of the lower year to date volume was offset by the value benefits of continued growth in premium brands and improved pricing.

Lion Nathan said the Australia business would also benefit from a price increase, effective on August 1.

New Zealand accounted for 20 per cent of Lion Nathan's sales last year.

- AAP, BLOOMBERG