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LNNF third quarter trading update

Lion Nathan National Foods (LNNF) today announced its trading update for the quarter ended 30 June 2010

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November 5, 2010

Lion Nathan National Foods (LNNF) today announced its trading update for the quarter ended 30 June 2010 in conjunction with Kirin Holdings third quarter announcement.

Alignment of reporting year ends to September 30 means the third quarter trading update reflects a nine month result for the Lion Nathan (LN) group[1] (October to June) and six months for the National Food (NF) business unit (January to June). NF’s October to December performance was disclosed on February 10.

All LN results are quoted on a year to date basis for October 2009 to June 2010 unless otherwise stated. Similarly, all NF results are year to date from January to June 2010.

LNNF invests in its people and a focussed portfolio of core ‘power brands’ to drive sustainable results in the long term. The business integration process is progressing to plan.

Lion Nathan

 

The Company’s alcohol businesses across Australia and New Zealand delivered a solid revenue performance of $1,756.5 million, growing 5 per cent on the prior corresponding period.

Following a very strong start to the year, in the third quarter the Australian beer market slowed, consistent with trends seen across the broader consumer goods sector. The third quarter also saw intensified competitor activity.

These factors contributed to some moderation in the very high revenue and volume growth seen earlier in the year. At the end of the third quarter, the beer market was flat on a year to date basis, while Lion Nathan Australia (LNA) performed slightly ahead of market on a volume and value basis. Tooheys Extra Dry 5 Seeds cider is performing strongly and supporting LNA’s volume growth.

LNA’s power brand portfolio grew its share of portfolio mix. Premiumisation across the market combined with successful innovation to drive solid revenue growth of 5 per cent.

XXXX Gold, the leading brand in the LNA portfolio, continued its impressive growth. Hahn Super Dry also performed well with new variant Hahn Super Dry 3.5 performing ahead of expectations. The Boags portfolio grew strongly, benefiting from the reach of LNA’s route to market and a significant increase in marketing investment, while recent innovation in the James Squire craft beer portfolio contributed to improved volumes.

After a challenging start to the year, driven by a weakness in consumer spending in the New Zealand economy that resulted in a decline in the total alcohol and beer markets, the market has recovered. The total New Zealand alcohol market is now stable on a year to date basis compared to the prior period, with Lion Nathan New Zealand (LNNZ) holding a stable volume share.

Innovation in recent years continues to account for a significant proportion of the Company’s revenue. In the year to date, LNNZ has brought to market two low carbohydrate beers, Speight’s Traverse and Stella Legérè, along with Mac’s Isaac’s Cider. The addition of the Bacardi and 42 Below portfolio of brands continues to deliver growth for LNNZ’s spirits business.

Good revenue growth was delivered by LNNZ’s beer portfolio despite modest beer market volume decline. Despite sluggish market conditions, solid performances from core brands and a continued focus on innovation helped LNNZ maintain total revenue growth at around 4 per cent. Reflecting the Company’s commitment to investing in its New Zealand business, Prime Minister John Key recently officially opened LNNZ’s new state-of-the-art Auckland production facility, ‘The Pride’.

Conditions in the wine industry remain very challenging with the global slowdown combined with an oversupply of grapes putting downward pressure on pricing in domestic and international markets. The strong Australian dollar is undermining returns from key export markets. However, despite this, the Lion Nathan Wine Group grew volume and revenue. Wine remains a very small part of LNNF’s business, at less than 1 per cent of group profit.

National Foods

 

As previously communicated, conditions in both the dairy and juice sectors remain very challenging for farmers and producers alike.

NF is still a long way from achieving an acceptable return on invested capital and faces some considerable headwinds. While these have moderated a little, input costs remain relatively high by historical standards and the business faces ongoing challenges to maintain adequate operating margins in a very competitive retail environment.

Against this backdrop, the NF business is making strong progress in integrating the former NF and Dairy Farmers businesses.

The combined business has quality brands that require investment to reach their full potential. LNNF is committed to patient investment in NF’s core strategic assets – its people, brands and production assets – to deliver sustainable growth over the long term.

As expected, NF revenue for the 6 months to June declined 9 per cent to $1.52 billion. This was significantly impacted by the divestment of the Freshco and Ski assets and as reported at the half year, EBIT performance is improving, albeit off an unacceptably low base.

There were some noteworthy successes during the June quarter. In particular, Dare Iced Coffee performed well, with a successful marketing campaign contributing to strong volume growth.

NF is focussed on innovation to drive value in its power brands and priority categories. Diary Farmers New Milk, launched in the second half of 2009, is progressing encouragingly. Yoplait formé Satisfy was launched in April 2010, designed to be high in protein and fibre to help consumers feel fuller for longer in between meals. In the third quarter, Yoplait formé was the Adult Everyday Yogurt category’s fastest-growing brand.

 

 

For further information, please contact:

Media Analysts

James Tait
Corporate Affairs Director
61 2 9320 2236
0400 304 147

Peta Joyce
Stakeholder Communications & Relations Manager
61 2  9320 2254
0400 015 605

 

About Lion Nathan National Foods

Lion Nathan National Foods 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 Nathan National Foods employs close to 8,000 people across Australia and New Zealand and delivers revenues in excess of AU$5.6 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 mates. The consumption of milk, dairy foods and juice and the responsible enjoyment of alcoholic beverages are all part of a healthy lifestyle for most people, and we aim to maximise the community wellbeing arising from the enjoyment of our products while playing a role in helping the community minimise misuse.


[1] ‘LN’ refers to all of LNNF’s alcohol businesses