Lion Nathan signals moderate earnings growth

Trans-Tasman brewer Lion Nathan Ltd has pointed to moderate short-term earnings growth after posting a big leap in profit for last financial year.

The company booked an annual net profit today of A$224.8 million ($NZ245 million) for 2004/05, up 40.4 per cent on the previous year.

However, the brewer said it expected a period of more moderate earnings growth in the short-term as it invested more in marketing its core beer brands and amid a flat profit outlook in its New Zealand business.

The company, 46 per cent owned by Japan's Kirin Brewery Co said it also planned to grow its dark spirit brands.

"In the short term, this (the combined investments) will lead to around five per cent underlying earnings growth for the group, with higher growth rates forecast over the medium term," the company said.

Lion Nathan makes Tooheys, XXXX, Hahn and Steinlager beers. Its main competitor in Australia is Foster's Group, while in New Zealand it competes with DB Breweries, a unit of Singapore's Asia Pacific Breweries Ltd.

Lion Nathan (LNA), who has launched a hostile takeover bid for Coopers Brewery Ltd, said the beverages market in Australia remained highly competitive.

And an increased brand investment would lay the foundation for greater medium and long-term earnings growth, it said.

"The trend to consumption of premium brands will continue and LNA is well placed to capitalise on the development and growth of the premium category via its domestic and imported brand portfolio," the company said.

In its Australian business, revenues after excise and discounts grew to a modest $1.143 billion in the year ended 30 September 2005, from $1.14 billion in 2003/04.

In New Zealand, revenues dropped back to a disappointing A$396.5 million during the year from A$417.1 million. Profit in New Zealand before goodwill, amortisation, interest and tax was A$69.8m ($NZ76.0m, around $NZ20m down on last year.

The company said the trend in overall beer market volumes in NZ was likely to remain generally flat or decline, and the pricing outlook would remain competitive in the current year.

For wines and spirits, net revenue increased to $214.3 million in 2004/05 from $198.9 million.

The company declared a fully franked dividend of 17 cents a share, bringing the total dividend for the year to 32 cents.

The New Zealand business experienced increasingly difficult trading conditions, however, reflecting intense competition in the market.

Ebita in New Zealand fell "a disappointing 17.2 per cent" to $NZ75.7m.

"The company's decision to reduce stock-weight was an important contributor to the lower profit result, but this will significantly improve the operational efficiency of the business moving forward, Mr Murray said.

In response to continuing difficult trading conditions in New Zealand, a review of the business strategy was completed to ensure the operations and structure are aligned to the rapidly evolving requirements of the New Zealand market, he said.

- AAP, additional reporting by NZPA