Lion H1 Trading Update

 

3 August 2012: Lion today announced its trading update for the half ended 31 March 2012 in conjunction with Kirin Holdings’ half year announcement.

Lion CEO Rob Murray said: “Like all businesses in the retail and consumer goods markets we are dealing with some very cautious consumers, who are saving up to five times the historical average and entertaining more at home.  

“A highly competitive retail market and deep discounting on select private label products is squeezing margins for branded players as volume shifts from branded to private label products and from the higher-margin non-grocery channel to grocery.

“In this environment Lion’s clear, long-term strategy of investing in its people, high-potential brands and manufacturing assets is more critical than ever. The only Australian manufacturers who will survive and thrive in the emerging marketplace will be those who innovate and differentiate their brands and who take tough decisions to deliver production, manufacturing and distribution efficiency.”

Despite the declining beer market, Lion’s Australian beer business delivered a standout performance during the half, continuing its positive momentum and emerging as Australia’s largest brewer.

“Our pre-existing portfolio grew volume and value share in a declining market as a consequence of Lion’s focussed long-term investment in marketing and innovation. The rise of our market-leading mid-strength beer XXXX GOLD to the number one beer brand in the country is evidence of this – and not only a positive commercial development but also a positive shift in our drinking culture more broadly,” continued Rob.

“The outlook for our Australian beer business is positive, with a number of international brand owners choosing to partner with Lion in this market, and our proposed acquisition of Little World Beverages presenting a further growth opportunity in the flourishing craft market.”

 

Beer, Spirits & Wine

Lion’s Beer, Spirits & Wine divisions in Australia and New Zealand increased revenues 1.7 percent to $1,197.8 million and delivered operating earnings before interest and tax (EBIT) of $337.3 million, an increase of 9.2 percent.

 

Australia

Lion’s Beer, Spirits & Wine division in Australia saw volumes increase 3.4 percent, leading to a 4 percent revenue increase to $929.1 million.

Lion saw volume share growth in every state off the back of strong performances from its core trademarks. XXXX GOLD grew volume and value share off a large base, as did Lion’s strong suite of contemporary brands Hahn Super Dry, Tooheys Extra Dry and XXXX Summer Bright Lager[1]. Lion’s James Squires trademark continued to drive growth in the craft market, posting volume and value growth over 50 percent[2].

During the half Lion announced the addition of Corona Extra to its international premium portfolio, however Lion’s first shipments were not received until April and are therefore not included in the H1 result. Since the conclusion of the half Lion has also welcomed Stella Artois and Belgian specialities Leffe, Hoegaarden and Belle-Vue Kriek to its portfolio, and from November will add Guinness and Kilkenny – rounding out its international premium portfolio to six of the top 10 brands in the market.

 

New Zealand 

Lion’s Beer, Spirits & Wine division in New Zealand saw volumes decrease 3.7 percent, leading to a 7.2 percent revenue decrease to NZ$350.1 million.

The decline was driven by falling beer volumes as a result of the overall market contraction and a highly competitive market, and exacerbated by a poor summer season.

Despite these challenges the Mac’s craft range maintained its strong pace of growth supported by pack extensions, and Beck’s enjoyed substantial growth off the back of broad-based sales and marketing activity. New product launches in cider strengthened Lion’s leadership of the category, while its successful spirits marketing platform, The Mix, continues to add incremental spirits volume. In wine, strong volume and revenue growth were fuelled by Lindauer, Corbans, and Saints brands acquired in November 2010, together with continued strong performance of Wither Hills.

 

Dairy & Drinks

Lion’s Dairy & Drinks division saw revenue decline 8.9 percent to $1,316.5 million and delivered operating earnings before interest and tax (EBIT) of $49.8 million, a decrease of 27.1 percent. While volumes were impacted by the loss of private label contracts, fresh dairy range deletions and the overall category decline in juice, the major impact on profitability was the ongoing decline of branded white milk sales and the transfer of volume from non-grocery channels to grocery as a result of $1 a litre private label pricing.  

While Lion remains concerned about the long-term implications of this aggressive pricing, it continues to focus on differentiation and innovation within a focussed portfolio of high-potential brands. Since the conclusion of the half Lion launched permeate free white milk across its Dairy Farmers and Pura brands, in response to the consumer trend towards less processed foods. New product innovation and a revitalised marketing campaign in its Yoplait yoghurt range has shown strong consumer uptake and moved the fresh dairy category into growth[3].

Lion’s invigorated marketing campaign for Australian Grown bucked the trend in the declining juice market to deliver volume and value growth, while Dare continued its standout performance in dairy beverages, growing value four times ahead of the category in both the grocery and petrol and convenience channels[4].

 

For further information, please contact:

Media                                                                Analysts

Leela Sutton                                                        Peta Joyce

External Relations Director                                   Stakeholder Communications & Relations Manager

61 2 9290 6645 / 0402 260 540                             61 2 9320 2254 / 0400 015 605

 

About Lion

Lion brings together great household brand names including Tooheys, Dairy Farmers, XXXX, PURA, Hahn, Berri, Speight’s, King Island Dairy, Boag’s, Yoplait, Wither Hills and COON. We believe business success comes from investing in our people and brands and by constructively engaging our stakeholders. Lion employs over 7,000 people across Australia and New Zealand and delivers revenues in excess of AU$5 billion.

In addition to direct employment, we make a significant contribution to the Australian and New Zealand economies. We are one of the region’s largest purchasers of agricultural goods and an integral component of the retail, hospitality and tourism industries. Our products accompany life’s sociable moments, whether it’s a family meal or good times at the pub with friends. Dairy, juice, soy and the responsible enjoyment of alcohol beverages are all part of a healthy lifestyle for many people and we aim to maximise the community wellbeing arising from the enjoyment of our products while playing a leading role in helping the community minimise misuse.

www.lionco.com

 


[1] Nielsen, MAT to 31/03/12 volume and value share

[2] Nielsen MAT to 31/03/2012, James Squire at 51.3% volume share growth and overall craft category at 28%.

[3] AC Nielsen, Adult Everyday Sweetened category value declining at 2.1% vs. year ago prior to launch (Sept 2011-Feb 2012), now growing at 1.8% vs. year ago

[4] ACNielsen, Petrol & Convenience Dairy Beverages VAL% change vs. year ago 8.6%, Dare 35.6% and Grocery Flavoured VAL% change vs. year ago 5.1%, Dare 26.6%.