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CASTLE MALTING NEWS in partnership with www.e-malt.com Korean
08 May, 2006



Brewing news USA: Lakeport Brewing Income Fund first-quarter sales up 16%

Lakeport Brewing Income Fund an Ontario-based brewer of value-priced, quality beer announced on May 10 that the positive growth momentum that it established through 2005 in sales and earnings continued through the first quarter of 2006 as Lakeport gained further market share.

Lakeport completed its public offering on June 21, 2005. However, to provide meaningful information, the Fund's first quarter results ending March31, 2006 are compared to the first quarter of the prior year, when Lakeport was privately owned.

Gross sales for the quarter ended March 31, 2006 were $29.2 million, up16 percent from $25.1 million in the 2005 first quarter. Lakeport's three leading proprietary brands - Lakeport Honey Lager, Lakeport Pilsener, and Lakeport Light - led the increase, growing a combined 19 percent in sales compared with the level in the 2005 quarter.

In total, sales of its nine proprietary brands accounted for 80 percent of Lakeport's sales volume in the2006 first quarter, equivalent to the level in the 2005 period. Reflecting Lakeport's cost-conscious culture and its growing economies of scale, its gross profit margin increased to 36.8 percent in the 2006 first quarter compared with 34.7 percent a year ago. EBITDA for the 2006 quarter increased 15 percent to $2.8 million from $2.4 million in the 2005 period.

Selling, general, and administrative expenses were higher in the 2006 quarter, compared with a year earlier, reflecting increased marketing expenses to further broaden and strengthen Lakeport's brand equity and consumer awareness. As well, the Fund now incurs costs associated with being a publicly owned structure.

Net earnings for the 2006 first quarter were $1.3 million, or $0.23 per unit (basic and diluted). Distributable cash for the quarter amounted to$2.3 million, exceeding the distributions declared during the quarter of $0.30per unit, or $2.2 million.

The results of the first quarter should not be considered representative of a 12-month period of distributable cash. The Fund determines the level of distributions after giving consideration to the cash required for cash flow enhancing capital, satisfaction of debt service obligations, amounts necessary to reduce the taxable income of the Fund, working capital reserves, and other reserves considered advisable by the Fund's Board.

"This was another great quarter for Lakeport in every respect," said Teresa Cascioli, Chair and Chief Executive Officer. Perhaps the best indicator that our growth momentum is continuing, notwithstanding intense price and product competition from foreign and domestic brewers, is our success at growing our market share of sales through The Beer Store, our principal channel to Ontario's consumers.

While The Beer Store's sales grew an estimated overall 3.3 percent in the first quarter, compared with a year ago, Lakeport's volume surged a truly impressive 15.5 percent. "Through 2005, we nearly doubled our market share of The Beer Store's sales to approximately 10 percent. In the first quarter of 2006, our market share grew to approximately 11 percent. As a result of our initiatives taken in the latter part of 2005, we also accomplished impressive growth in sales of Lakeport's leading brands through the LCBO stores in the quarter, almost tripling our market share in this channel to approximately 3 percent as compared to the same period in the prior year." Ms. Cascioli said.

"It also is notable that, even as we stepped up our marketing programs in anticipation of the summer season, our growing production and sales volume, and our ongoing razor focus on costs enabled us to achieve earnings growth," she said.

"During the 2006 first quarter and in April, Lakeport has launched a number of important initiatives that we expect will enable us to sustain our growth in the value-priced segment of Ontario's beer market," said George Croft, the Fund's President and Chief Operating Officer. "Perhaps the most visible of these initiatives is the fact that our three top-selling brands -Lakeport Honey Lager, Lakeport Pilsener, and Lakeport Light - are now available in newly designed packaging that we expect will increase the equity of our Lakeport brand with the growing number of consumers who are looking for our products.

"We also expect that our recent success in gaining recognition by The Beer Store for Lakeport Pilsener as one of the top 10 selling beers in Ontario will provide increased shelf space and visibility in The Beer Store. Lakeport Honey Lager had previously gained this distinction, which we believe resulted in sales growth," Mr. Croft said.

"Other notable initiatives including the introduction of Lakeport Honey Lager and Lakeport Pilsener in 473 mL cans through the LCBO; the addition of Lakeport Pilsener to the LCBO's core list, which will mean that the majority of its outlets are required to carry the product; the availability within The Beer Store of Lakeport Honey Lager (Ontario's number one selling honey beer)and Lakeport Light (the fastest-growing light beer in the province) in 355 mL cans, joining Lakeport Pilsener, which had previously been available in six-pack cans; the launch of our top-selling brands in a 24-pack cans' suitcase' format at The Beer Store and Retail Partner Stores throughout Ontario and the introduction of Lakeport brands in 24 pack bottles formats through LCBO Combination and Northern Agency stores," Mr. Croft said.

"At this time, every indication is that Lakeport's 'Great Beer. Fair Prices' message continues to resonate with consumers in growing numbers, "Ms. Cascioli added. "They love our pricing and, as or more important, they love our beers when they try them and keep coming back for more."





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