Brewer welcomes better results but cautious on outlook in NZ

Lion Nathan's New Zealand fortunes had finally taken a turn for the better, the transtasman brewer said yesterday.

Local beer sales grew by nearly 13 per cent to 52.7 million litres in the first quarter ended December 31 due to strong sales of such core brands as Lion Red.

Although the first quarter was encouraging, Lion Nathan said it remained cautious about the outlook for consumer spending in New Zealand and the effects of continued competitive pricing in the market.

Beer volumes also grew in Australia, lifting almost 3 per cent to 198.3 million litres on the back of strong growth in international premium and national brands and the lower trade inventories.

But this was offset by a fall in regional and value brands, which resulted in a slight decline in overall volume on a comparable basis.

The story for wine was not so good though, with Lion Nathan saying oversupply in the Australian market meant slow growth.

International wine volumes were also flat, with a shift towards higher-value but lower-volume premium brands resulting in reduced sales for some labels.

However, Lion Nathan said its Wither Hills (New Zealand) and Argyle (United States) brands continued to experience strong demand.

Overall, Lion believes strong first-quarter sales mean it is set to achieve its profit guidance for the 2006 financial year, which sees a 5 per cent increase in net profit.

"We are pleased with the solid first-quarter result with beer volume and overall group earnings in line with our business plan, giving us confidence that we are on track for our full-year profit guidance," chief executive Rob Murray said.

Lion's New Zealand business was the subject of an operational review last year.

When the company reported its annual results in November, Murray called the local results "disappointing", warning shareholders to expect flat profit for up to three years.