E-Malt.com News article: Australia: Lion Nathan reported a 3% increase for the 2006FY

Australia's second-largest brewer, Lion Nathan Ltd., has lifted underlying Net Profit after Tax by 3.2% to AU$ 257.4 million for the year to 30 September 2006 but warned higher commodities prices and business reorganisation costs would hit fiscal 2007 earnings growth, Reuters communicated November 13.

The company said it expects fiscal 2007 net profit of AU$245-AU$260 million ($188-$200 million), excluding one-time and significant items, a touch below expectations of AU$260.7 million in a survey of analysts by Reuters Estimates.

Shares in Lion Nathan, 46 percent-owned by Japan's Kirin Brewery Co., fell 2.6 percent to AU$8.16, while Australia's broader share market dipped 0.2 percent.

"I think people are just disappointed with the outlook statement for next year," said CommSec analyst Pierre Grobler.

"The guidance is for largely flat to slightly lower operating performance, which is disappointing, but I think given some of the initiatives that they've started and certainly the commodity cost pressures, it seems quite reasonable," he added.

Lion Nathan, which brews Tooheys, Hahn, XXXX and Steinlager beers, said November 13th that annual net profit before one-off items was AU$257.4 million, up 3.2 percent and just beating market forecasts for AU$254.2 million.

Lion Nathan mainly competes in Australia against Foster's Group Ltd. and in New Zealand against DB Breweries Ltd., a unit of Asia-Pacific Breweries, and has this year launched an expansion drive into spirits.

Chief Executive Rob Murray said his focus for 2007 was on positioning Lion Nathan to deliver higher sustainable future earnings growth, but warned higher aluminium and sugar prices would impact it by around AU$15 million. He said aluminium and sugar were largely hedged for 2007 and partially for 2008, but wouldn't disclose pricing details.

Higher interest costs resulting from 2006 capital management initiatives to return money to shareholders and a weaker New Zealand dollar would also slow growth, the brewer said.

Murray told reporters Lion would look at acquisition opportunities that arose but wouldn't rely on them for growth.

"The market we're in is that dynamic and competitive that you can't afford to build your world around one magic bullet," he told reporters.

He said the company planned to expand its spirits operations following a solid launch in August of its McKenna bourbon whiskey in southeast Queensland.

Lion Nathan has this year targeted expansion into the dark spirits and ready-to-drink (RTD) markets, where bourbon, rum and whisky-based drinks are among the fastest growing retail liquor types.

Murray said Lion would look at expanding its spirits offering beyond Queensland, and would consider whether it needed more than one brand, but would not provide more details. Lion has gained New Zealand regulatory clearance for a possible bid for New Zealand's Independent Liquor Ltd., but has not decided whether to proceed.

"We view Independent as a profitable business that could give us some scale as we seek to enter and grow RTDs on both sides of the Tasman," Murray said, although he noted the challenges that integration would provide.

Murray said he expected to face strong competition for premium beer sales from Pacific Beverages, the new joint venture of Coca-Cola Amatil Ltd., the world's second-largest brewer.

Last week, Pacific said it agreed to sell and distribute Maxxium Australia spirits brands, including Jim Beam, and ABSOLUT VODKA, and manufacture ready-to-drink beverages.

($1=AU$1.30)


15 November, 2006