Lower NZ beer sales hurt Lion in 2012

Lion group boosted operating earnings before interest and tax by 5% to $A625 million in the full year to September 30 but was dragged down by lower beer sales in New Zealand.

The trading update for New Zealand and Australia was released in conjunction with Japan-based Kirin Holdings’ full year announcement.

Chief executive Stuart Irvine says consumer sentiment has remained relatively subdued during the period, which precedes a long, hot summer in New Zealand.

“In these tough conditions, we are seeing some good momentum in the Australian Beer, Spirits & Wine business as innovation drives revenue growth and international brand owners choose to partner with Lion,” he says.

But conditions are more challenging in the Dairy & Drinks business, which operates in a highly competitive environment with discounting on white milk, juice and everyday cheese impacting margins.

After a 7.7% earnings decline last year, the Beer, Spirits & Wine division returned to growth with operating earnings before interest and tax rising 7.6% to $A633.3 million.

The Beer, Spirits & Wine division in New Zealand saw total volumes slip 5%, leading to a 3.9% decline in revenue to $NZ659.8 million.

The total New Zealand beer market declined 5.1%, with the first half result impacted by the unseasonably poor weather over the 2012 summer and the rate of decline reducing in the second half.

“This solid result in challenging circumstances was driven by strong performances from Beck’s and Mac’s, with the latter ascending to the No 1 volume driver in the craft category,” Lion says.

“Since the end of the financial year, Lion has moved to further strengthen its craft beer offering with the addition of Dunedin-based Emersons.”

Wine, cider, spirits, RTDs and non-alcoholic RTD volumes all grew despite a very competitive pricing environment. With strong performances in pinot gris, shiraz, pinot noir and merlot, Lion’s wine portfolio grew ahead of the category, posting a 16% increase in volume in the final quarter, versus a category decline of 2%.

Bourbon performed well in spirits, with a strong performance from the McKenna Bourbon brand a highlight in the last quarter, with the highest growth of its top 10 peers.

Continuing this growth trend, bourbon RTDs contributed the highest absolute gains to this category, supported by McKenna, Lion says.

The company has written down goodwill and brands by $A305.1 million in the Dairy & Drinks business unit and $A210.2 million in the Beer, Spirits & Wine business unit, mostly from New Zealand.