DB challenged by rising costs, low dollar

By Phil Boeyen, ShareChat Business News Editor

Wednesday 23rd May 2001

A leaner DB Breweries (NZSE: DBG) has managed a slight improvement in its share of the beer market although it says increased costs and the low dollar have hit margins.

For the six months to the end of March DB has reported a profit of $48.7 million, more than three times last year's interim profit of $15.22 million.

However the result included the one-off gain of $34 million from the sale of its Corbans wine business to Montana (NZSE: MON), as well as $2.1 million in interest earned before the gain was distributed to shareholders in December.

Sales were $156.5 million against $347.5 million previously, again reflecting the sale of Corbans as well as the sale of Allied Liquor Merchants and NZ Liquor.

In the beer business the company says its volume share of the total market has continued to increase, rising 1.1%, while net revenue from beer sales was up 3%.

Earnings before interest and tax from the brewery division fell, however, from $22.7 million last year to $22.1 million.

"The directors are very satisfied with this result given the significant cost increases arising from inflationary pressures and the lower value of the NZ dollar," DB says in a statement.

The company is also happy with its ability to have grown sales over the previous period when that period included such positive one-off events as initial beer load into supermarkets, the Millennium celebrations and the America's Cup.

DB says corporate overhead costs have reduced following the following the discontinuation of liquor and wine operations and going forward its key focus remains on beer and in becoming the country's most valuable brewery.

"DB Group will continue to focus on building the value of its premium and mainstream brands, on improving operational effectiveness and on developing the skills and professionalism of its people," it says.

The company says it is cautiously optimistic that it will meet its operational and financial targets for the year and the challenge will be its ability to manage cost increases with the continuing pressure caused by inflation and New Zealand's fluctuating exchange rate.

A fully imputed interim dividend of 11.5 cents per share has been declared.

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