Case volumes for the wines and spirits/RTD business were down slightly YTD, mainly due to the loss of the Allied Domecq portfolio, offset by strong wine volume growth.
Lion Nathan beer volumes (excluding UK licensed and international export volumes) grew 0.8% to 657
million litres for the nine months to June 2007.
Australian year to date (YTD) volumes were up 0.6% to 531 million litres, continuing the trend of growth
in national brands offset by a decline in regional and value brands. Overall volume growth trends were
negatively impacted in the third quarter by subdued demand, particularly in NSW, and extensive
competitor activity in May and June. Nevertheless, the Power Brand1 portfolio grew 3.5% YTD, with
International Premium brands, Tooheys Extra Dry and XXXX Gold continuing to show good growth in
spite of strong competition, while Hahn Super Dry maintained an impressive growth trend in its first
year. The overall beer market continues to grow, with MAT volumes up an estimated 0.5% to May 2007.
In New Zealand, Lion Nathan beer volumes grew by 1.9% to 126 million litres YTD primarily due to core
brand growth. Premium volumes in particular were strong, driven by both international and domestic
premium. Steinlager Pure was successfully launched in June and early sales results are encouraging.
In the Lion Nathan Wine Group, which encompasses Wine Australia, Wither Hills, Argyle and the Fine
Wine Partners business, volume growth was driven by core brands, particularly St Hallett, Petaluma,
Stonier and Wither Hills and included strong export sales to UK/Europe during the quarter.
Lion Nathan confirms its guidance for operating NPAT (NPAT pre significant and one-time items) of
$250 - $260 million for the 2007 financial year.
Sale of Auckland Brewery
Lion Nathan today announced it has entered into an agreement to sell its current Auckland Brewery site. AMP Capital Investors has purchased the site for NZ$162m, subject to New Zealand Overseas
Investment Office approval, and intends to develop the property for high-end residential, retail and office
use. NZ$50 million of the sale price will be realised in this financial year with the balance payable when
Lion Nathan exits the site. The sale arrangement means that Lion Nathan expects to continue to
operate from the Newmarket site for around 4 years while a new facility is built. The sale process was
managed by CBRE and the outcome represents a strong sales result in the current property market.
Explaining the decision to re-locate, Lion Nathan CEO Rob Murray said: “A once in 50 year investment
was needed if we were to remain at our current site. Over the years Newmarket has changed into a light
commercial, retail and residential area. As a manufacturing site the property is now landlocked, making
access and expansion increasingly difficult. The long-term benefits we can achieve by establishing a
new facility elsewhere in Auckland are simply too positive to pass up. ”
“Building a brand new manufacturing and warehousing facility in Auckland is a significant investment
that positions our New Zealand business for the long-term. The new facility will allow us to better align
our production and supply chain with the needs of the marketplace, further improve the environment for
our people, improve customer responsiveness, optimise productivity and create new opportunities to
improve our environmental performance, for instance our energy and water efficiency.”
Lion Nathan confirmed that it has secured options on a number of alternative Auckland sites. As
evaluations are ongoing, the Company will not elaborate on those options until a decision on a new site
is made – most likely before the end of November 2007.
A new manufacturing and warehousing facility will require land, plant and equipment expenditure of
around NZ$250 million. The alternative of staying at the existing brewery would have required an
investment of around $NZ50 million triggered by a decision to commit for the long term to the existing
site. The net investment based on these estimates stands at approximately $NZ40 million. This
investment will yield a solid return in EBITDA benefits of NZ$10-15 million per annum after completion.
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