Lion Pty Ltd, the Australian arm of Japan’s Kirin Holdings, has seen first-half profits drop at its dairy business, which was hit by lower sales and higher raw materials costs.

Lion booked EBIT of A$44m (US$39.3m) at its dairies division in the six months to 31 March, an 11.6% drop year-on-year. Sales were down 5.5% at the unit, falling to A$1.24bn. The company attributed the decline to weak consumer sentiment in a highly competitive environment.

“While Lion continues to pursue opportunities to optimise its cost-base and improve competitiveness it remains a long way from achieving an acceptable return on invested capital, with revenue pressure offsetting efficiency gains,” the group said.

In contrast, Lion’s wine and spirit business saw both revenue and EBIT rise by 21.7% in the period. Sales totalled A$1.45bn and EBIT rose to A$410.5m, the company revealed.

Kirin, Lion’s Japanese parent company, reported a 5.6% rise in operating income, which totalled JPY60.4bn (US$604.9m) in the half. Sales were up 5.2% to JPY1.09trn, the company said.

To view Lion’s trading update click here, or to access Kirin’s financial report click here.