Lion Nathan forecasts further double-digit growth in earnings

By NZPA

Thursday 7th November 2002

Australasian brewer Lion Nathan Ltd said today it expected to record another double-digit increase in net profit to $A180 million ($NZ206.37 million) for the present financial year.

Chief executive Gordon Cairns made the forecast when announcing a post-tax profit of $A162 million for the year ended September 30.

The result was up 20 percent on the figure of $A135 million for the previous 12 months.

"Our guidance number to the market is around $A180 million, which would be another year of double-digit increase," Mr Cairns told journalists.

He said he would have been more bullish but for a beer price "skirmish" in Australia and added costs associated with the drought gripping large parts of the continent.

Lion Nathan would have to respond to "imprudent" price discounting by rival Forster's Brewing Group, but expected "rational" thinking to prevail before a fully-fledged price war developed, Mr Cairns said.

The drought had resulted in a poor barley crop in New South Wales and Queensland, which meant barley would have to brought in from Western Australia.

Mr Cairns said net cash flow from operations during 2001-2 grew 31 percent to $A231 million.

"We have a strong profit engine in beer, which just keeps motoring," he said.

Earnings before interest, tax and amortisation (ebita) for the Australian, New Zealand and Chinese brewing businesses rose 9 percent to $A390 million.

Ebita in Australia was up 7 percent to $A318 million, while in New Zealand it increased 5 percent to $NZ104 million.

Mr Cairns said Lion Nathan, which is 46-percent-owned by Japan's Kirin Brewery Co, was "more than happy" with its performance in New Zealand, where volumes had remained stable over the past four years.

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

"Not only that, we got off to a slow start in the first quarter, then we came home strongly. We had much stronger pricing in the second half and we made the pricing stick, so we have great momentum going into 2003."

In China, beer volumes increased 27 percent, while losses fell 24 percent to $A14.7 million.

"I think we are about 12 to 24 months away from breaking even in the cash line and about 24 to 36 months away from breaking even at a profit-and-loss line," Mr Cairns said of the Chinese operations.

Lion Nathan's Wine Group increased volumes to 808,000 cases, generating ebitda of $A8.6 million.

During the year, Lion Nathan bought two Australian wine companies, Petaluma and Banksia.

Its most recent purchase, Wither Hills in Marlborough, was not concluded until after the September 30 balance date.

Mr Cairns said Lion Nathan was still a "tiddler" in the sector, but its accent on premium labels meant it was acquiring "a wine list to die for".

A fully franked final dividend of 12 cents a share was declared, up 50 percent on last year, after the board decided to increase the payout ratio to 70 percent of core earnings.

Mr Cairns expected the ratio to continue in the foreseeable future and said it would still leave $A800 million to $A1 billion over the next three years for further acquisitions.

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