Australia: Lion Nathan confirms guidance, reports solid first quarter
Following a solid performance from its Australian and New Zealand beer businesses in the first quarter ended 31 December 2005, Lion Nathan confirmed on February 10 its guidance of underlying earnings (NPAT pre significant and one-time items) growth of around 5 % for the 2006 financial year.
Total Group beer volumes for the quarter were up 4.8 percent to 251 million litres due to growth in core brands and lower trade inventories at the end of the 2005 financial year, which resulted in increased customer demand early in the 2006 year. Adjusted for this one time effect, total Group volume is estimated to be flat on a comparable basis.
In Australia, volumes were up almost 3 percent to 198.3 million litres primarily due to strong growth in international premium and national brands and the one time effect of lower closing trade inventory in 2005. This was offset by a decline in regional and value brands, leading to an estimated slight decline in overall volume on a comparable basis. Consistent with previous indications, key national brands are receiving increased support in 2006, as evidenced by national television advertising for XXXX Gold, Tooheys Extra Dry now available on tap, and the launch of XXXX Special Brew. There will be further developments across the Australian brand portfolio in 2006. International premium brand growth was led by double-digit volume increases for both Heineken and Becks.
In New Zealand, beer volume grew by almost 13 percent to 52.7 million litres with a pleasing level of underlying core brand growth, and again a one time impact of lower closing trade inventory in 2005. Comparable volume growth is estimated at low single-digit. While the first quarter was encouraging, with positive market share indicators and signs that the New Zealand tap beer market is stabilising, we remain cautious about the outlook for consumer spending in New Zealand and the effects of continued competitive pricing in the market. In addition, the first quarter also cycled a weak comparative period in 2005. Lion Nathan Wines and Spirits and the Distinguished Vineyards wine distribution business performed very well with volumes up around 9%.
In the wine business, the Fine Wine Partners integration in Australia has been successfully executed. Difficult trading conditions in the Australian wine market due to the oversupply of wine continued to hinder growth in the first quarter resulting in flat overall volumes, although strong growth was recorded for the St Hallett and Preece brands. International volume was flat, with planned changes in mix towards higher value but lower volume premium brands contributing to reduced sales for some brands, while both Wither Hills and Argyle continued to experience strong demand.
Commenting on the outlook, Lion Nathan CEO, Rob Murray said: “We are pleased with the solid first quarter result with beer volume and overall Group earnings in line with our business plan, giving us confidence that we are on track for our full year profit guidance.”
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