Lion profit up 20pc, with 5pc rise in NZ

By SIMON HENDERY liquor writer

New Zealand beer drinkers downed 2 per cent more Lion Breweries products in the past year, helping transtasman parent company Lion Nathan boost operating profit in this country by 5 per cent.

Sydney-based Lion Nathan yesterday reported a 20 per cent rise in net profit after tax to A$162 million ($183 million) for the year to September 30.

Sales revenue rose 8.6 per cent to A$1.66 billion.

Earnings before interest, tax and amortisation (ebita) from the New Zealand operation rose 5 per cent to $104 million and sales revenue was up 11 per cent to $506 million.

Lion Breweries managing director Julian Davidson said sales of seven of the company's top 10 New Zealand beer brands were up on the previous year.

Sales of the company's most profitable brand, Lion Red, remained in decline, but Davidson said he was confident that trend would be reversed this year.

Lion Breweries increased its marketing spend by 10 per cent over the year, mainly through increased television advertising and its Steinlager sponsorship of Team New Zealand's defence of the America's Cup.

While packaged beer sales were up over the year, tap beer sales continued a five-year decline. However, Davidson said the tap beer decline was slowing and he expected that section of the market to turn around next year.

Lion would increase beer prices again next June when the Government's inflation-based excise increase was imposed, but Davidson said Lion's price rises would be below the average 4.9 per cent hike of this year.

Lion Nathan chief executive Gordon Cairns said he was "more than happy" with the company's performance in New Zealand.

"It's a very strong result for New Zealand, if you look at it in a historical perspective," he said.

On Tuesday New Zealand's other big brewer, DB Breweries, reported a 3 per cent drop in operating profit to $30 million on sales of $287 million, up 3 per cent.

Lion Nathan said losses by its fledging China business were down by 27 per cent to A$14.7 million in the past year and Cairns said he expected that business would be profitable within 36 months.

Ebita from Lion's Australian brewing business were up 7 per cent to A$317.7 million, while ebita from the newly acquired premium Australian wines businesses Petaluma and Banksia Wines were A$8.6 million.

Lion made its first foray into the premium New Zealand wine market after its balance date, buying Marlborough's Wither Hills winery for $52 million.

Cairns refused to comment when asked whether the company was pursuing any further New Zealand wine acquisitions.

Lion will pay a 12c-a-share final dividend this year, up from 8c.

Cairns said the increased payout would still leave the company with between A$800 million and A$1 billion to spend on smaller beer and wine company acquisitions over the next three years.

He expected a group net profit of about A$180 million for the current financial year. Lion Nathan shares fell 1c yesterday to $6.05.