CDS and energy costs hurt Lion’s earnings

08 August, 2018 by Andy Young

Lion has released its trading update with the first half of the year, revealing a drop in net sales revenue and operating earnings.

The results have been released in conjunction with Kirin Holding’s half year report and Lion has said that despite the first half challenges, it remains on track to deliver a full year increase in operating earnings “driven by continued improvement in market share, growth in premium categories and cost management”.

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Speaking about the result, Lion’s CEO Stuart Irvine said: “On-going weakness in consumer spending, coupled with rising cost inputs, means that we face challenging conditions in both the beer and dairy markets.  However, we continue to make good progress in tapping into the growing high-value segments and adjusting our cost base to reflect market realities.”

Lion’s net sales revenue decreased by 1.6 per cent to $1,912.5m, which the company said was impacted by challenging trading conditions in Australia and New Zealand’s mature beer markets. However Lion said that its sales in premium categories remained strong, particularly in the growing craft and contemporary beer segments.

The company also said that the impact of the introduction of the NSW Container Deposit Scheme and rising energy costs had contributed to a 9.2 per cent decrease in the first half group operating earnings to $241.8m.

Within its beer portfolio, Lion pointed a recovery from market share challenges during the June quarter, which it attributed to its focus on investing in its portfolio of brands and particularly in the contemporary and craft beer segments.

The national rollout of Furphy and the continuing momentum of Iron Jack have helped to boost Lion’s volume share. The company also said that full strength Iron Jack was showing “promising early signs” since its launch in June.