Australia: Lion Nathan Confirms 2005 Net Profit after Tax Guidance of $230-$235m

Lion Nathan brewery announced on August 11 that they remain on track to deliver full year Net Profit after Tax (‘NPAT’) from Operations of between $230 million and $235 million, prior to one time charges.

Commenting on the third quarter results to June 2005, Lion Nathan CEO Rob Murray said: “The performance of our Australian beer business has improved over the year and while the New Zealand beer market remains challenging, it is pleasing to confirm our previous guidance of full year NPAT from Operations of between $230 and $235 million. This is prior to the impact of previously announced one time costs relating to the Two Dogs product recall of $5.8 million and other fourth quarter one time charges.”

Total beer volumes for the group were flat for the third quarter at 188 million litres excluding licensed XXXX volume in the UK and the discontinued China business (74 million litres, 2004).

Australian beer volumes were marginally ahead of the same quarter last year but on a year to date basis were slightly lower reflecting overall market volume decline. The impact of the lower year to date volume was offset by the value benefits of continued growth in premium brands and improved pricing. Market share was stable when compared to last year and no significant cost pressures were experienced during the period. Going into the final quarter the Australian beer business will also benefit from a price increase, effective 1 August.

New Zealand beer volumes for the quarter were ahead of the same period last year but were down by five per cent year to date. This is attributable to continued weakness in on-premise trading which is being adversely impacted by legislative changes and a very competitive pricing environment for packaged beer. Despite these challenging conditions the business maintained its marketing investment behind core brands. Due to these factors full year EBITA from Operations for the New Zealand business is expected to be in a range of NZ$75 million to NZ$80 million, 12 and 18 per cent below prior year.

Commenting on the New Zealand business, Lion Nathan CEO Rob Murray said: “While the expected New Zealand full year result is disappointing, we take heart from recent performance improvements, especially in market share and customer engagement. We are also recognising the need to address stock weight building in prior years, which is greater than we had previously anticipated, the impact of which will be fully realised in the fourth quarter.”

Wine volumes were stable on a year to date basis when compared to the same period in the prior year, with strong demand for Wither Hills and growth in the New Zealand wine distribution business offset by a decline in Australian wine volumes. The impact on margins from the lower sales in Australia was partially offset by improvements in mix.

Distinguished Vineyards (a Lion Nathan owned wine company) and Tucker Seabrook also announced today the conclusion of negotiations to establish a joint venture in Australia for the sale, marketing and distribution of their respective portfolios of premium wines. The new joint venture is expected to be operational from October 2005. Lion Nathan CEO Rob Murray said: “This joint venture delivers an important milestone for our business and a compelling portfolio of premium wines for our customers. One time establishment costs of around $2 million will be incurred by Lion Nathan in the fourth quarter in relation to the start up of the new joint venture which will be fully recouped by cost synergies in the first full year of operation. This is one small step on our critical path to improving the returns from our wine business.”

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