Lion Nathan

Wellington, May 20 NZPA - Brewer Lion Nathan is warning further price rises are likely this year to recover significant historic cost increases.

Reporting its half-year results today, the Australian-based company said a price increase in this country in March would only alleviate some of the cost pressures and partially restore beer margins.

Beer raw material costs, particularly aluminium, sugar, barley, glass, and energy, had risen significantly in recent years and well ahead of the consumer price index, Lion Nathan said.

The reasons for further price rises included the impact of exchange rate movements on foreign-priced input costs.

In New Zealand, domestic beer volumes held steady for the six months to the end of March, at the same time as some consumption was moved to higher value brands.

The company said its reported earnings before interest and tax (ebit) in this country rose 3.1 percent to $56.5 million in the first half of this financial year, compared to the previous corresponding period.

Domestic beer volumes for New Zealand edged down 0.3 percent, but were reported as 91m litres in both periods.

Total volume in this country, including beer, wine, spirits, and ready-to-drinks (RTDs), edged down 0.4 percent to 105m litres. Net sales revenue was down 0.6 percent to $324.2m.

The company said its New Zealand business had been able to gain ground through innovation and mix improvements in beer, helped by volume gains in wine, spirits and RTDs.

But export and mainstream beer volumes declined, with beer exports down 1.3m litres for the period as macro economic factors caused demand to contract.

The demand contraction was particularly noted in Hawaii, where Steinlager had a strong presence, and where tourism levels were down significantly on the previous year, Lion Nathan said.

Domestic beer volumes held steady despite the comparable period a year earlier benefiting from the timing of Easter and a hot New Zealand summer.

In the latest half year consumers migrated to "step up" and premium beers.

"Much of this movement to higher value brands was due to recently launched brands Steinlager Pure and Speight's Summit. In addition, Steinlager Classic returned to growth," the company said.

Wine, spirits and RTD volumes grew 11 percent in the first half in New Zealand, with all categories growing.

New product development initiatives in wine, and new agency brands more than offset the loss of the Moet Hennessy agency brands in February 2008, the company said.

Its Auckland brewery project was well under way, with the brewhouse now being built, after which packaging and distribution equipment would be installed.

It was anticipated Auckland operations would be fully moved to the new facility in 2011, with total projected spending on the project remaining at $250m.

For the company as a whole, Lion Nathan, which is Australia's second-biggest brewer, said its first half profit rose 6.9 percent, confirming its unaudited results released last month.

The company, which will be taken over by its major shareholder Japanese brewer Kirin Holdings, said profit for the six months was $A176m ($NZ229.4m).

The group also reiterated last month's revised outlook for a full year net profit after tax of $A305m to $A315m, before significant items.

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