Australia: Lion Nathan announced a year profit up 40.4 pct

Lion Nathan Ltd., Australia's second-largest brewery, announced on November 9 its annual profit increased 40.4 %, driven by stronger beer revenues in its major market for 12 months ended September 30, 2005.

Sydney-based Lion Nathan, which has made a A$352 million ($257 million) takeover offer for unlisted Coopers Brewery Ltd., said net profit for the year to Sept. 30 was A$224.8 million, from A$160.1 million a year ago, according to Reuters.

The company, 46 % owned by Japan's Kirin Brewery Co., said profit before one-off items was up 13.7 percent to A$230.4 million, in line with company guidance for earnings between A$230 million and A$235 million.

Lion Nathan makes Tooheys, XXXX, Hahn and Steinlager beers. Its main competitor in Australia is Foster's Group Ltd., while in New Zealand it competes with DB Breweries, a unit of Singapore's Asia Pacific Breweries Ltd.

Chief Executive Rob Murray plans to boost advertising and marketing of higher priced beers such as James Squire and Hahn, which are more profitable than cheaper brews, as he tries to limit the impact of a stagnant overall beer market. Murray made a hostile A$352 million bid for Coopers Brewery Ltd., Australia's No. 3 brewer, in September to add brands such as Sparkling Ale.

“They're doing the right thing investing in those brands but there is only so much you can do when the industry is working against you,'' said Matt Hoult, who helps manage the equivalent of $2.7 billion at ABN Amro Asset Management (Australia) in Sydney. “Volumes are inexorably declining.''

Lion Nathan shares closed up 1.7 percent at A$7.93 on Tuesday, but its shares have eased about 8 percent for the calendar year to date compared to a 12 percent gain in the wider market.

Australia Rises

Second-half net income surged 28 percent to A$97.2 million in the six months ended Sept. 30 from A$76.1 million a year earlier, helped by Australian beer sales and the divestment of its unprofitable Chinese breweries, Lion Nathan said, according to Bloomberg.

Full-year earnings before interest, tax and amortization from beer in Australia, where Lion Nathan gets 70 percent of sales with brews such as Tooheys, rose 5 percent to A$371.5 million as the company held market share and raised prices.

While there was a 2.6 percent decline in the overall Australian beer market, where Lion Nathan trails market leader Foster's Group Ltd., brands including Tooheys New, XXXX Gold and Hahn Premium Light all recorded sales growth, the company said today.

“Investment in brands will be a feature of the Lion Nathan Australia strategy, particularly in national and premium brands,'' Murray, 42, said in a statement. “The trend to consumption of premium brands will continue and Lion Nathan Australia is well placed to capitalize,'' Murray said.

Melbourne-based Foster's had an 11 percent gain in fiscal 2005 earnings for its domestic brewing unit with higher sales of ready-to-drink premixed spirit beverages helping limit the impact of a 1.2 percent drop in beer volumes.

New Zealand Rivalry

In New Zealand, where Lion Nathan is the biggest brewer, earnings dropped 15 percent as beer volumes fell on increased rivalry from second-ranked DB Breweries Ltd., a unit of Singapore's Asia Pacific Breweries Ltd.

Sales have also been hurt by the rising trend for consumers to buy more of their beer at retail outlets rather than pubs as well as law changes such as smoking bans and the introduction of the Holiday's Act. The Act requires employers to pay workers more on public holidays, leading some restaurants to add a surcharge on food and drinks or close on those days.

Lion Nathan is trying to boost its share of New Zealand retail beer sales and will spend more promoting brands such as Speight's and Lion Red, Murray said.

($1=A$1.37)

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