Australia: Lion Nathan expected to announce growth in profit

Lion Nathan Ltd sets to post a rise in annual net profit before one-offs and other items this week, as investors wait to see how the brewer plans to expand its share of the more profitable spirits market, Asia Pulse announced on November 7.

The market will also expect a progress report on the trans-Tasman company's A$352 million (US$257 million) takeover bid for privately-owned beer maker Coopers Brewery Ltd when reports its results on Wednesday. Lion Nathan has offered $260 per Coopers share, but the takeover bid has been bogged down by numerous court cases linked to the process through which Coopers shares are bought and sold.

Shaw Stockbroking research director Scott Marshall stated he was expecting Lion Nathan's net profit before non-recurring items and excluding outside equity interests to come in at about $228 million for 2004/05 compared to $202 million in the prior year.He said this was in line with the company's guidance in August of a forecast net profit before one-off costs of $230 million to $235 million for the year to September 30, 2005.

Mr Marshall said Lion Nathan had indicated that its New Zealand beer operations were being negatively affected by very strong competition but the company appeared to be holding its own in the Australian beer market.

"Overall the beer market goes on to be relatively flat so the company has to generate value enhancement by releasing new premium beers and RTDs (ready-to-drink mixed spirits), and where possible to gain some price increases," Mr Marshall said. CommSec consumer staples analyst Pierre Grobler said there was talk that Cooper's may launch a share buyback to match Lion Nathan's takeover offer.

"Whether Lion would come in and beat that is speculation," Mr Grobler affirmed.

Mr Grobler stated Lion Nathan management was likely to comment about the Cooper's takeover battle, which he said was looking more unlikely to succeed. "The Cooper's board is very much opposed to the takeover and it (Cooper's) is a very closely-held company among the Coopers family," he said.

Notwithstanding the Cooper's battle, Mr Grobler said he would like to see Lion Nathan making a stronger and more assertive push into the high-margin spirits and RTD market.

"Beer is losing share to some of these things and they really need to bolster their offerings in premium beverages, he said.

In August, Lion Nathan had said the growth in premium brands such as Heineken and Becks and higher prices would compensate for a decline in overall sales volume.

Lion Nathan posted a net profit for 2003/04 of $160.1 million after non-recurring items - a result that was dragged down from $180 million in the previous year by the sale of hotel portfolio HMC and write-downs on the Australian wine business.

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