Beer prices rise with DB's profit

By SIMON HENDERY

DB Breweries has reported a 2.1 per cent increase in half-year net profit and says it will increase beer prices to help reach its annual goal of 10 per cent operating profit growth.

The country's other major brewer, Lion Nathan, is also increasing its prices.

DB yesterday reported a net profit of $17.2 million for the six months to March 31. Sales were up 7.3 per cent to $182.9 million over the half year and pretax profit rose 14.2 per cent to $26.8 million.

But the $1.9 million tax refund that boosted the company's coffers this time last year following settlement of a long-running dispute with IRD meant the strong increase in operating profit was not reflected in the bottom line this time around.

From Singapore, home base of DB's majority shareholder, Asia Pacific Breweries, DB managing director Brian Blake said the excellent half-year result meant the company was well placed to achieve its previously stated annual growth target in earnings before interest and tax (ebit) of at least 10 per cent, barring unforeseen circumstances.

That growth, however, would be at the expense of beer drinkers, who would need to dig deeper from the end of this month.

DB and Lion will both increase prices from June 1, the day a 1.55 per cent increase in excise tax takes effect.

Blake said the beer market had been very competitive since January and DB's move to increase prices was necessary to ensure its margins were not eroded in the second half of the financial year.

Prices of DB's mainstream tap beers (DB Draught, Tui and Export Gold) would increase 3 per cent, while the same products in cans and bottles would rise 6.5 per cent.

Blake said the downstream effect at retail outlets would be that beer that had been selling for $12.95 a dozen on special would rise to $13.95.

Lion Nathan spokesman Graham Seatter said that like DB, Lion had advised its trade customers of price increases from June 1. Lion was also putting tap prices up 3 per cent and packaged prices up 6.5 per cent.

At $12.95, consumers were paying the same price for beer as they were 10 years ago, Blake said.

"We need to move that up. It seems to have got locked in at that price, which is putting pressure on margins."

The price rises would offset expected increases later this year in the cost of malt and aluminium, as a result of the weakening of the New Zealand dollar, Blake said.

Seatter said increased petrol costs were also a factor in Lion's decision to raise prices.

Price increases for DB's "premium" beer ranges, including Heineken and Monteith's, would vary, Blake said, "but won't be too far off" the mainstream rises.

Blake said growth in beer sales was being driven by stronger interest in premium beer. Growth of Heineken, which had been in the local market for 10 years, hit a new high over the past year.

"That whole premium end of the market is growing but the real driver of that has most certainly been Heineken."

DB has had strong interest from operators wanting to open bars under its Monteith's theme. There are nine Monteith's theme bars and Blake said he expected that number to grow to 20 within 18 months.

He expected DB's performance to come under more pressure during the second half of the financial year, but he remained confident it would achieve the 10 per cent ebit growth target.

The company's performance in April, the first month of the second half, had been pretty much on target.

DB will pay an interim dividend of 16.5c a share (up from 13c last year) on June 9.