Lion Nathan ups guidance as negotiations with Kirin continue

Posted by Daniel Palmer on 24th April 2009

As discussions with major shareholder Kirin regarding their takeover proposal continue, Lion Nathan has announced a 6.9% rise in net profit after tax for the first half – an announcement that was brought forward from May 20.

Lion Nathan CEO Rob Murray, who is widely tipped to stay on as boss of Kirin’s Australian operations if the deal proceeds, tipped further progress in the second half due to innovations, the growth of Boag’s and the later Easter.

“These first-half results show the resilience of our business, which has delivered another set of robust numbers,” he said. “Five years ago, we made the decision to invest in our most valuable assets; our brands, our people and our breweries and we made a commitment that the investment would be followed by a step up in earnings. At the time we could not have predicted the economic conditions we would face. For that reason, it is even more rewarding to see the business delivering ahead of our forecasts.”

Australia’s second largest brewer said the results were stimulated by strong growth from many of their beer brands – particularly core brands like Tooheys New and XXXX Gold. Volume was up by 4.6% in Australia, with premiumisation and wellbeing trends resilient despite economic headwinds.

“Our core beer markets have remained robust despite the economic circumstances, with premium beer remaining attractive as an affordable luxury,” Mr Murray advised. “The level of innovation has had a very positive impact and consumers continue to move to more premium beers. We have seen some switching to at home consumption in particular regions, but overall the market remains in good health.”

Lion’s revision in profit guidance today from between $300m-$315m to $305-$315m and the early release of the first-half figures appear a sign that they are not yet satisfied with the offer proposed by Kirin.

The price the Japanese brewer is willing to pay remains unclear, with reports suggesting that their initial offer was around $11. Kirin offered $11.50 to Lion when looking to up their stake from 46.13% to 47.5% last year as part of the failed bid for Coca-Cola Amatil, however, that deal involved the realisation of significant operating synergies.

Lion Nathan remains in a trading halt pending an update on the Kirin proposal, with an announcement due by Monday morning.