Lion Nathan optimistic on year ahead

By Phil Boeyen, ShareChat Business News Editor

Tuesday 11th December 2001

Beer and wine company Lion Nathan (NZSE: LNN) is promising minimum profit growth of 10% in the current financial year.

CEO Gordon Cairns gave shareholders the optimistic forecast at the company's annual general meeting on Tuesday.

"In reviewing trading results for the first two months of the 2002 fiscal year I can confirm that Lion Nathan, having grown earnings by 14% in the 2001 fiscal year, is on track to deliver double-digit after tax earnings growth in the current financial year," Mr Cairns says.

The view was backed up by Lion chairman, Geoff Ricketts, who was speaking at his first AGM as chairman after taking over from Douglas Myers.

"In these uncertain times it is important to remember that we have, in Lion Nathan, a solid business with strong and sustainable cash flows," he told Lion shareholders.

"We can grow the worth of that business as well as profit from the development of our premium wine strategy. It is my firm belief that we are unusually well positioned as a business, to face the future and take advantage of opportunities that are bound to arise".

Although Lion lost out on its bid for Montana to UK-based Allied Domecq this year, Mr Ricketts says the company has created significant value for shareholders through a disciplined approach to the execution of its wine strategy.

"When we realised that we weren't able to create value from buying Montana at the price being offered by Allied Domecq, we sold and realised an after tax profit of almost A$65 million."

The new Lion chairman says that going into the New Year the company's beer businesses are performing well and it has a strong balance sheet, with gearing at the lowest level in 10 years due to robust operating cash flow and the proceeds of the Montana sale.

"This has enabled us to secure the cornerstone for our premium wine strategy by acquiring control of Petaluma and Banksia whilst remaining well within our borrowing guidelines."

Shareholders were told that the company sees significant potential to grow earnings and returns from both Petaluma and Banksia but that the approach will be cautious.

"Our focus over the next twelve months will be on bedding down these two acquisitions and working with strong management teams in Petaluma and Banksia to ensure that they continue to deliver great results," says Mr Ricketts.

"During that period as things stand, it is not our intention to make any significant further investments in the wine industry."

Shareholders were also asked at the meeting to increase the ceiling on directors' fees to A$700,000. The chairman says the money will not be used to increase remuneration of current directors but will pay for two additional non-affiliated Australian based directors to the board.

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