09 February, 2005

Australia: Trans-Tasman beer-maker Lion Nathan announced on February 7 its beer sales in Australia and New Zealand were suffering from price competition, a fall in demand for tap beer and poor weather. Lion Nathan said that, after a solid start to the year, its Australasian beer business experienced challenging trading conditions at the end of the first quarter, which continued into January, and beer volumes fell compared to the same period last year.

Lion Nathan said that beer volumes in Australia in the first quarter had fallen 2.6 % due to competitive pricing and a softer tap-beer market. The impact of the volume decline had been partly offset by a continuing shift to higher-margin premium brands, where volumes grew, and pricing improved. In New Zealand, beer shipments fell 4.3 %as a result of poor weather over the holidays and the introduction of legislation affecting on-premise trading.

"The performance of our Australian and New Zealand beer business, particularly since the end of December, has been disappointing," Lion Nathan chief executive Rob Murray said. "At this early stage of the year it is not easy to forecast what impact this will have on our full year result but we would expect that net profit after tax (from operations) for the 2005 fiscal year will be within the $230 million to $235 million guidance already provided to the market."

Lion Nathan's beer brands include Tooheys, Hahn, XXXX, Swan, Beck's and Steinlager.

Mr Murray said this was before the impact of a one-off provision of about $5 million for raw materials, inventory and other associated costs in the company's Australian RTD (ready-to-drink) contract packing business as a result of a product recall initiated by the distributor in Japan at the end of 2004. The charge would be taken in the first half but could be reduced by recoveries from third parties.

"The pricing environment remained very competitive with Lion Nathan bringing its pricing down in December to meet the market," the company said. "Demand for higher-margin premium products remained strong." A spokesman for Lion Nathan said its beer sales were experiencing competition from other beer brands and RTDs. The spokesman said it was too early to predict how long the company's beer brands might experience trading difficulty.

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