Lion Nathan improves in tough market

By Phil Boeyen, ShareChat Business News Editor

Monday 28th May 2001

Lion Nathan says solid performances from its core Australasian beer business have helped improve interim profit.

For the six months ended March the company recorded an after-tax net profit of A$89 million, up 16% on the previous year. Earnings before interest and tax rose a similar amount to A$201.4 million.

Despite difficult market conditions in Australia Lion says such factors as volume growth and better net pricing helped trading.

In Victoria the company's beer volumes rose 17% in a flat market while market shared increased 2.3%, which it says validates the acquisition of some 45 hotels in the state.

Operations in China, which proved a drag on its previous annual result, also look to be improving.

Last year the brewer took a $120 million hit on the unprofitable business and said performance there was less than satisfactory.

Although it still describes trading conditions as difficult the company says significant cost savings have been made and a number of key brands are performing well.

In New Zealand earnings before interest and tax grew by 7.4% to $57.7 million, and Lion says its integrated liquor strategy has helped it to successfully reach more customers with more products.

CEO Gordon Cairns says with the latest result the company has met and exceeded its strategic aims by key measures of profit and performance.

"It clearly demonstrates that the earnings momentum from our brewing business is being maintained.

"It also provides us with a solid base on which to build a premium Pacific Rim wine business of which our recent investment in Montana is the first step.

The comment adds further fuel to Lion's commitment to hold on to its Montana stake despite the stronger challenge being mounted by Allied Domecq.

In continued jostling for shares Allied last week shifted its stake to over 26% while Lion now has 62%.

"Strategically, we are delighted to have taken a controlling interest in New Zealand's leading wine company, Montana. I am excited at the prospect of building a quality wine business that will provide us with the ability to accelerate our growth further," says Mr Cairns.

Lion says although market conditions for its brewing businesses remain challenging, it's confident it will achieve full-year earnings in line with market expectations."

An interim dividend of A8 cents per share will be paid.

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