KEY POINTS:
Australasian liquor giant Lion Nathan expects flat New Zealand profits to improve as a beer price war comes to an end.
The Sydney-based company issued its financial results for the year to September 30 yesterday, saying this year's stagnant returns were due to the increased cost of beer
production and a "highly competitive" pricing environment.
Chief executive Rob Murray said: "There are encouraging signs of value growth and cost recovery leading to a modest improvement in operating earning before interest and tax in 2008."
Lion Nathan was not prepared to discuss its pricing strategy or its effect on modest rises in predicted profits for 2008. But the managing director of Lion Nathan's main New Zealand rival - Brian Brake of Asia Pacific Breweries' DB Breweries - said yesterday that "sanity had returned to the beer market" after breweries increased prices in July.
For two years prior to that both the breweries and supermarkets had been involved in a price war that hit margins, he said.
Lion Nathan results showed the New Zealand division - which incorporates beer, wine and ready-to-drink brands - lagged behind Australia.
New Zealand revenue was up 4.7 per cent but Australia grew by 7.1 per cent, led by its wine division and a shift to higher priced premium beer brands. New Zealand operating profits were flat at $86.7 million.
The increased costs of producing the beer - including record prices paid for raw materials aluminium and barley - affected profits from both sides of the Tasman. New Zealand domestic beer revenue was up 2.1 per cent, driven primarily by the shift to premium brands.
Corona was up by 40 per cent off a low base, Stella Artois was up by 4 per cent while Steinlager Classic increased 3 per cent.
Speights grew by 0.5 per cent, and Lion Red fell by eight per cent due in part to a strategy to only market it heavily in the top half of the North Island.
Overall Lion Nathan group operating profit to September 30 increased 3.8 per cent to A$267.2 million.
Murray said the group profit was "a good result in a highly competitive market that has only recently begun to see some signs of value growth amid rising costs of doing business".
TOUGH MARKET
* Lion Nathan operating profit to September 30 increased 3.8 per cent to A$267.2 million.
* Australian revenue increased 7.1 per cent as Australians shifted to premium brands.
* New Zealand revenue increased 4.7 per cent and operating profits was stagnant at $86.7 million.
* Lion Nathan reports a "highly competitive" market in New Zealand.
