A tick from the market for brewer, Lion Nathan after it forecast higher returns in the 2009 financial year.
Australia’s number two brewer yesterday revealed a 7% rise in interim earnings to $167.7 million before one off items, compared with $156.8 million for the first half of the 2007 year.
That was well above market forecasts of $159.6 million: the interim result included a contribution from Tasmanian premium brewer James Boag for the first time, after Lion bought the brewer in November for $325 million.
But higher prices for important ingredients like sugar, barley and aluminium and fuel clipped the company’s first half earnings somewhat.
Lion Nathan shares rose 20c in the first 10 minutes of trading to $8.62 (the results were released before trading) and then bounded to a day’s high of $9.09 on the outlook. They then eased in the afternoon to be up 23c at $8.65.
Lion’s CEO Rob Murray told a conference call that he was ‘comfortable’ with estimates of a 15% rise in 2009 earnings from investors.
That could see earnings top the $300 mark for the year.
Murray reiterated his forecast for 2008 annual profit between $265 million and $275 million before a "significant step-up” in 2009. Analysts are forecasting an average $272 million for 2008.
If there is a surge in 2009 earnings then it will end three years of slowing growing earnings as the company has cut costs, restructured and had to battle higher input costs for barley, sugar water, energy, glass and aluminium.
Murray said he will raise prices, with an increase of 2% needed to fully recover higher costs. Prices were lifted by more than 5% in New Zealand last week for beer and spirits.
Earnings from Lion’s Australian beer business before interest and tax rose 7.3% to $248.7 million, thanks to higher sales of national bulk brands such as Tooheys Extra Dry and XXXX Gold and a $10 million contribution over the full 2008 year from Boag’s.
In New Zealand, earnings edged up 2.8% to $47.6 million after a fall in the first six months of 2008. Warm weather boosted demand for beer, wine and pre-mixed spirit drinks across the Tasman.
Earnings from Lion’s wine group rose 25% to $7.9 million as the company moved to full ownership of its Australian distribution unit and the absence of one-off items from the year earlier.
Lion has about 42% of the Australian beer market compared with 55% held by Fosters.
The company said it’s too early to know the impact on sales of the Federal government’s decision to almost double the tax on pre-mixed spirit drinks, such as the Bacardi Breezers and McKenna bourbon and cola Lion Nathan sells. The changes, announced last month and confirmed in the budget last week, will increase the retail price of a can or bottle of the alcopops by between 30c and A$1.30.
Mr Murray said the increases in excise are likely to dampen demand and "we’ll have to revisit our business plan".’
Japanese brewer, Kirin owns 46% of Lion Nathan, it also owns National Foods (and the Berri juice business) and wants to bid for NSW-based Dairy Farmers, but will strike problems with dairy farmer groups and the ACCC.
