Lion exceeds targets

Press, 12 August 1980, Page 23

Lion exceeds targets

PA Wellington Target results of Lion Breweries’. . diversification and expansion programme had been exceeded in the past year, the managing director (Mr John Macfarlane) says in the annual report “Initial indications fcr the coming year indicate a continuation of achieving profits in excess of the rate of inflation, however the latest tax imposed will be a challenge to overcome,”, he says. He says the past year has been marked by two main factors.

“Firstly, the limitations placed on beer sales by the disproportionate taxes on alcohol which were further compounded in the .1979 Budget, with a new tax on beer of 30 per cent' on top of an excise duty and. the action of the Government in allowing the entry of cheap Australian beer.

“Secondly, the continuing reaction of the company in the face of these attacks on our main product of moving into npn-brewing activities, with I lam glad to say, considerable success.’

Earnings rose 21.7 percent to $12,600,000 — exceeding the profit objective by $400,000. The dividend is being recommended to increase for the second year in succession from 17.5 per cent to 20 per cent, this increase being in line with the stated objective of increasing' returns to shareholders in an endeavour to keep in line with inflation. Mr Macfarlane reports

that brewing sales had been I < reduced in volume by nine| per cent .because of the con- ; tinning .depressed economic - conditions, further emigration, especially by the young, ■ “drink-drive blitzes” which, he says were more properly aimed at higher alcohol products but nevertheless having an impact on beer—“the drink of moderation” and most of all the huge impact on price of the sales tax impost. The company’s market share, which experienced inroads through expansion of Dominion Breweries in the South Island had now stabilised. The division had experienced satisfying progress with Steinlager for export in the past year, with earnings in excess of $1 million. New marketing agreements were made with'' Lion Export in Australia and in Japan. Profits from the managed hotels were increasingly important to gross profit. They made an operating contribution of $7,400,000, a rise of 23.8 per cent. He reports that Leopard Breweries, whose sales had been adversely affected by imports of foreign beers, ■ was making vigorous efforts >to compensate for loss of ; gallonage. During the year the com- • pany had successfully nego- ■ tiated internal refinancing . of about $U58,200,000 of off- > shore debt.

The company is implementing a staff programme on alcoholism providing assistance towards any

[employee who recognises [they had a drink problem and wanted to overcome it ■This programme can be made available to other interested companies, Mr Macfarlane says. The report includes in-flation-adjusted accounts in line with the Richardson committee’s report. This shows that the current cost profit of the group before taxation was $13,839,000, a reduction of $14,646,000 when compared with the historical cost figure of $28,485,000. Mr Macfarlane says the profit achieved by this method of accounting is a

more realistic method of calculating the results for the year. “The ’ inflation experienced over the past year has produced ‘book profits’ being • unreal profits on which we are obliged to pay tax. On a. strict comparison of historic cost to current cost accounting the results show that tax amounting to $4,300,000 has been paid on these profits,” he says. “The Government continues to disregard the committee’s finding, and as a result companies which show healthy profits calculated on a historic cost basis find themselves with severe liquidity problems,” he says.