KEY POINTS:
The New Zealand operations of Australasian brewer Lion Nathan have continued to be a drag on the Japanese-controlled company.
Lion reported net profit, including one-offs, rose 24 per cent to A$282.1 million ($332.3m) with operating profit for fiscal 2007 up 3.8 per cent to A$267.2m.
New Zealand revenue rose 4.7 per cent while operating earnings before interest and tax were stable on $86m.
Lion said the New Zealand result was in line with expectations following higher input costs in a highly competitive market.
Lion forecast an increase in group profits for fiscal 2008.
The brewer said it expected net operating profit in fiscal 2008, excluding the acquisition of J. Boag and Son Pty Ltd, to be between A$270m and A$280m.
Lion chief executive Rob Murray said the New Zealand performance was a good result in a market that had begun to see signs of value growth and cost recovery.
Lion is forecasting "modest improvement" of a 2 per cent increase in NZ operating earnings in 2008 and was on track for a lift in earnings after fiscal 2008.
It said premium beer sales grew strongly, driven by international brands, particularly Corona, and the launch of the Steinlager Pure brand.
Lion's New Zealand wine portfolio performed strongly but ready to drink volumes declined due to the loss of the Allied Domecq portfolio.
This was partly offset by the successful launch of the McKenna Bourbon brand in the second half.
New Zealand beer volumes rose 0.5 per cent and exports grew 14 per cent.
Volumes of the Speights brand grew 0.5 per cent but Lion Red declined 8 per cent.
Led by Wither Hills, which transferred to the New Zealand business, wine volume increased 19 per cent.
One-off items for the group totalled A$14.9 million on a post tax basis, and included a net gain on the sale of its Auckland brewery site.
The addition of the Boag business during the year is expected to be earnings per share dilutive before becoming EPS accretive in its first full year of ownership in fiscal 2009, Mr Murray said.
The company also has forecast a significant increase in earnings in fiscal 2009.
"Despite the short-term impacts affecting operations in FY08, the company continues to focus on its strategy of building sustainable long term growth through investment in brands, breweries and people to deliver shareholder value," it said.
"Accordingly, the outlook is for a significant step up in earnings from the 2009 financial year."
Lion said this year's earnings would be affected by higher barley costs, which it expects to add about A$10 million in pre-tax costs due to the drought.
Smoking bans, higher capital expenditure and a continued investment in spirits and ready to drink products also would affect earnings in fiscal 2008.
The company has forecast overall costs of goods sold per litre to rise by about 4.5 per cent in fiscal 2008.
Lion said the 2007 profit was driven by a 6.6 per cent lift in revenue to A$1.97 billion, and a 10.4 per cent increase in earnings before interest and tax to A$452.7 million.
The increase in revenue reflected increased brand investment and new product development, along with a continued shift in the product mix to national and premium brands, the company said.
Profit growth was achieved despite higher barley costs due to the drought in Australia, and higher aluminium prices.
The implementation of the company's spirits and RTD strategy also pushed up costs by A$98.5 million.
The Australian business boosted operating EBIT by 4.7 per cent to A$413.2 million despite a flat beer market in the second half affected by smoking bans in NSW, South Australia and Victoria.
Net sales revenue in Australia rose 7.1 per cent due to a combination of factors including national and premium brand growth and new product development, led by strong growth in Tooheys Extra Dry and Hahn Super Dry, the firm said.
Operating ebit in the wine business jumped 37.1 per cent to A$13.3 million due to robust key brand performance, particularly from St Hallett, Petaluma and Wither Hills.
Lion announced the A$325m acquisition of Boag on November 8.
It declared a final dividend of A21 cents per share, up one cent, or five per cent, on the previous corresponding half.
The total dividend for 2006/07 increased one cent to 40 cents, up 2.6 per cent.
Lion shares fell 19 cents to $10.45 on the New Zealand exchange.
- NZPA, AAP
