E-Malt.com News article: 2616

New Zealand's DB Breweries Ltd. has reported a 2.1 % in half-year net profit and says it expects to comfortably reach its target of 10% growth in annual operating profit in the current year and further increase its share of the local beer market, Managing Director Brian Blake told Dow Jones Newswires on May 11. "Margins are tight in the more mainstream brands, but we continue to achieve good sales, which should see us achieve our full-year target," Blake said.

Earlier on May 11 the company posted a 2.1% rise in net profit to NZ$17.2 million for the first half to March 31, compared with NZ$16.8 million a year earlier. Operating profit, expressed as earnings before interest and tax, or EBIT, rose 14.2% to NZ$26.8 million from NZ$23.4 million during the same period. "We have focused on growing EBIT by 10% a year and I think we are on target to do that again this year," Blake said. He said a price increase, scheduled to take effect late next month, should somewhat ease margin pressure on its mainstream brands such as DB Draught and Tui.

"The price increase is designed to address a few things, such as the competitive pressure in the mainstream market and the impact of a weakening New Zealand dollar," Blake said. "Our anticipation is that the (New Zealand) dollar is going one way, which is down, and we're preparing our business to adjust or compensate for it."

Higher import prices for aluminum cans, malt and sugar will continue to challenge profit margins if the local currency weakens further, Blake said. The New Zealand dollar, which rose to a seven-year high of US$0.7102 in February, has fallen sharply over the past two months. It slipped to a 6-1/2 month low of US$0.6015 in New York overnight.

DB Breweries, which is 77%-owned by Asia Pacific Breweries Ltd., a joint venture between Dutch brewer Heineken NV and Singapore-based Fraser & Neave Ltd., expects to further grow its share of the beer market in the next 12 months.

The company has increased its market share by 0.5 percentage point to 35.5% over the last 12 months, Blake said. "We are also continuing to improve our position in Auckland," where the company's share of the beer market is just over 30%.

The premium end of the market, which provides good margins for DB Breweries, is expected to sustain strong growth over the second half and the next financial year.

"That whole premium end of the market is growing at a solid rate, led by Heineken, and we're also getting very good results out of the Monteith brand," Blake said.

The company has a 20% share of the premium beer market. Blake said the beer market is expected to maintain its 1% to 2% growth rate of the past two years despite a slowdown in New Zealand's economy from the frenetic pace of 2002 and 2003. "We've seen a lot of investments in some of the new outlets, and that's partly driving this growth, which is very encouraging," he said.


12 May, 2004