Lion profit jumps but China still in the red

By Phil Boeyen, ShareChat Business News Editor

Monday 16th October 2000

China continues to be a trouble spot for former New Zealand brewer Lion Nathan, which has announced an unaudited net profit for the year to the end of August of A$130.2 million, up from A$100.2 million last year.

The unaudited results have been released as the company moves from an end-August to September 30 balance date. An audited 13-month set of accounts is expected early next month, along with final dividend payments.

Sales rose from A$1.526 billion from A$1.437 billion last year.

Losses in China were reduced by A$2.9 million to A$24.3 million, which the company says was pleasing, but it still described the overall performance of its Chinese operation as unsatisfactory.

It says there is continued over capacity which has lead to an unsatisfactory pricing environment, and many brewers, including Lion Nathan, have been operating their breweries and distribution systems at significantly less than full capacity.

LNN says while profitability improved in the current period, volumes fell to 77.3 million litres, down 30% on the last year. The company says the Chinese beer market remains challenging, and it will focus on three directions there this year - defending its strong markets, driving nationally for higher-margin premium-brand products, and approaching the competitive Shanghai market in a more focused but lower-cost way.

In New Zealand the company has reversed a profit decline of the past two years, with earnings before interest and tax growing nearly 8% to A$76.5 million.

The Steinlager brand grew 15% and is now the premium category leader in supermarket sales. Sales of premium brand Stella Artois also helped grow revenue, lifting 50% on last year, but the mainstream beer market is under pressure, with Lion Red volumes falling.

Overall the company says the New Zealand outlook is positive, with a flat beer market offset by the company's move to an integrated liquor offering through it Lion Liquor concept, supported by a stake in Montana and the acquisition of the balance of New Zealand Wines and Spirits.

LNN also remains bullish on Australian prospects, despite the competitive beer market there. It says innovation will be a key success driver, such as its Hahn Premium Light brand. which was launched two years ago and has become Australia's fastest growing light beer.

However the company says the recent rise in beer prices, particularly tap beer, as a result of a dramatic increase in excise which accompanied the introduction of GST, is beginning to have an impact on beer consumption in regional and rural Australia. Lion Nathan says it will continue to work with the beer and retail industries to reverse the excise rate increase.

The latest figures cap off a busy year for the brewer, during which it sold its soft drink businesses, moved its head office to Australia, started a couple of internet businesses, bought a sizeable chunk of Montana Wines, spent A$60 million on 43 hotels and destination venues in Victoria, and A$18 million on a new brewhouse for its Castlemaine brewery in Queensland.

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