Lion Nathan result knocked by hotels

By SIMON HENDERY

Lion Nathan's share price dipped yesterday after the transtasman liquor company reported a disappointing half-year result.

Lion's net profit for the six months to March 31 was A$84.1 million, down from A$109.7 million for the same period last year.

The half-year result was weighed down by a A$34 million write-down of a portfolio of hotels Lion is selling in Victoria.

The company said it still expected to achieve its previously stated full-year profit target of between A$195 and A$200 million, up from $180 million last year.

While group-wide earnings before interest, tax and amortisation (ebita) increased 2 per cent to A$235 million, ebita from the group's New Zealand brewing business went backwards, falling 10.2 per cent in New Zealand dollar terms to $51.1 million.

Outgoing managing director Gordon Cairns, who leaves the job this year, said the New Zealand result had been hit by the increased shift towards supermarket sales of beer.

Lion Breweries NZ, which contributes about 22 per cent of total group sales, had also been hit with one-off costs of about $4 million.

Those costs were the result of a restructuring which led to the loss of about 30 jobs, a write-down of stock and a writing-off of bad debt.

Cairns said the company remained optimistic it could improve New Zealand earnings in the second half of the year. It believed it could reach earnings targets previously given to the market even though that would involve increasing New Zealand ebita from A$40 million for the second half of the past financial year to A$50.2 million in this half year.

Cairns said that would mainly be achieved through previously announced price increases which take effect from the start of next month. The price hikes, 3 per cent for tap beer and 6.5 per cent for packaged beer, are expected to increase earnings by A$9.8 million over the half year.

"It looks a little bullish coming off a soft first half," Cairns said. "And the reason we're relatively comfortable on the outlook for the second half for New Zealand is that we've been conservative on volume [forecasts], we won't get one-time items recurring and the increase will be almost 100 per cent determined by the price [increases]."

Lion's beer business performed much better in the past half-year in Australia with ebita increasing 8 per cent to A$198.6 million.

Cairns said the size of Lion's wine business was smaller than ideal in order to compete effectively, but the company had not made acquisitions because wine business prices remained unrealistically high.

Revenue from Lion's loss-making brewing business in China increased but the company said stiffer competition and higher costs meant it was unlikely to achieve the break-even result at the ebita level it had previously hoped for this year.

Lion shareholders will be paid a 14c per share fully franked dividend on June 23.

On the NZX, Lion shares closed down 22c at $7.15.