Lion said that trading conditions in both Australia and New Zealand remained challenging throughout the 2015 financial year.
A 5.6% decline in Group net sales revenue to $3,355m (A$4,709m) was driven by Lion’s decision to sell its low margin everyday cheese operations, the non-renewal of private label milk contracts toward the end of the prior year, and a contraction in beer volumes driven by the overall market decline in Australia and New Zealand.
Partnership in China
The Group says it was still able to deliver a 4% increase in group operating earnings before interest and tax to $495m (A$695m) (excluding one-time items) due to a focus on more profitable categories, continued premiumization and effective cost management.
Lion CEO, Stuart Irvine said, “Despite the tough conditions, we’ve remained firmly focused on managing our business for the long-term and we are continuing to invest in our brands, new facilities and to grow our presence in Asia.
“During the year we made significant progress in re-gearing our dairy and juice businesses to the highest potential segments of the market and launched key initiatives to return the beer market to growth.
“We have re-invested cost savings for future growth, successfully commissioning the largest and most advanced specialty cheese-making facility in the southern hemisphere in Burnie, Tasmania, a new Petaluma Winery and cellar door in the Adelaide Hills, a $70m brewhouse upgrade at our West End Brewery in South Australia and a new White Rabbit Brewery in Geelong. A new spiritual home for Emerson’s brewery in Dunedin is also expected to open in mid-2016.
Irvine added that Lion Asia Dairy signed a distribution partnership with the leading fresh milk processor and distributor in Southern China to import, market and distribute a range of Lion’s branded Australian dairy products across the Guangdong Province.
Dairy & Drinks
Lion said that year one of the Lion Dairy & Drinks business’ three-year turnaround plan has been successful. While total volumes declined 17.4%, the focus on more profitable categories and cost management delivered an upturn in profitability versus the prior year.
The volume impact was driven by the sale of Lion’s everyday cheese business in May 2015, the non-renewal of private label milk contracts in the last quarter of the prior year, and a reduction in juice sales, primarily in the ambient category.
The proceeds from the sale of Lion’s everyday cheese business are being reinvested in brands, facilities, and innovation in higher-value growth categories.
Growth in priority categories
Lion said its priority categories of specialty cheese, milk-based beverages and yogurt all achieved solid growth.
It noted that Farmers Union yogurt delivered double-digit growth with Farmers Union Greek Full Fat 1kg Yoghurt now the number one selling yogurt in Australia. Dairy Farmers Thick & Creamy also continued its strong growth trajectory.
Lion added that its milk-based beverages also continue do well. Dare is continuing its growth in all states supported by an increased marketing investment and the launch of new flavor and pack variants.