Strong beer boosts Lion

By SIMON HENDERY liquor writer

Lion Nathan's operating profit from its New Zealand brewing business grew 8 per cent over the past year to top $100 million for the first time since 1996.

Echoing competitor DB Breweries, which also reported its annual result this week, Lion Breweries attributed the increase to the growing beer market and cost savings.

The brewing business' $100.3 million in earnings before interest, tax and amortisation (ebita) for the year to September 30 came from sales revenue of $431.7 million, up 5.8 per cent from $407.9 million the previous year.

The earnings figure excluded a $3.4 million operating loss for Lion Breweries' internet development company Real and its online liquor store site Shop Naked.

When converted to Australian dollars in Sydney-based parent company Lion Nathan's books, the local brewing business's A$87.1 million result accounted for 21 per cent of the transtasman liquor group's earnings of A$406 million, up 9 per cent from A$372 million last year.

The group's net profit after tax increased 11 per cent from A$162 million to A$180 million.

Lion Breweries New Zealand managing director Julian Davidson said the local operation had continued an aggressive focus on marketing over the year, lifting its spending by 13 per cent.

"We could have made the result significantly higher, but we made a conscious choice to apply a lot of money back in that marketing line and we won't really see the benefit of that for another year or two."

Sales of Lion's beers through supermarkets rose 24 per cent over the year.

Davidson said five of its eight major brands increased sales over the year. They were Speight's (up 15 per cent), Steinlager (9 per cent), Waikato (2 per cent), Mac's Gold (23 per cent) and Stella Artois (30 per cent).

But traditional favourite Lion Red was down 8 per cent, Canterbury Draught lost 12 per cent and Lion Brown 13 per cent.

Davidson said Lion Red had been most vulnerable to price rises during the year, and sales had been hardest hit in South Auckland.

To counter that decline, the company had introduced new pack sizes to give customers different price options. It was also tweaking its marketing of Lion Red.

Average alcohol consumption per head had remained unchanged for three years, but population growth has meant beer consumption rose 1.8 per cent in the year to June.

In Australia, the group's brewing business earnings grew 5 per cent to A$330.5 million.

Its seven-year-old China beer business broke even at the earnings before interest, tax, depreciation and amortisation (ebitda) level for the first time.

Chief executive Gordon Cairns said the company's wine and spirits business - which reported an earnings drop from A$20 million to A$3.1 million - had been disappointing as it faced difficult trading conditions, particularly in wine export markets.

But its New Zealand winery, Wither Hills, lifted sales by 78 per cent after increasing production by adding new vineyards.