Australian food and drinks group Lion has said conditions in the dairy and juice sectors remain “very difficult” after it booked a decline in first-half profits.
The dairy and drinks division delivered EBIT of A$68.3m in the first six months to the end of June, a fall of 43.2% on the year.
Sales slid 9.4% to A$1.4bn, driven by the loss of key private-label contracts and a decrease in exports due to the impact of the strong Australian dollar.
Lion’s white milk volumes slid 10.9% due to the loss of the own-label contracts.
Nonetheless, Lion said it remains “committed to patient investment in its core strategic assets” to deliver “sustainable growth over the long term”.
“Lion’s dairy and drinks business is still a long way from achieving an acceptable return on invested capital and continues to face significant margin pressures in both dairy and juice,” the firm said in a trading update on Friday (5 August).
In the six-month period, Lion’s parent Kirin Holdings reported a 0.9% slide in sales to JPY1tn (US$12.7bn). A 6.4% drop in alcoholic drinks sales in Japan, in part a consequence of the earthquake that struck the country earlier this year, outweighed a 27.6% increase in sales at the group’s overseas beverages business.
However, lower selling costs in beer and pharmaceuticals helped Kirin to increase half-year operating profits by 21.7% for the six months, to JPY72.8bn.
Kirin reported JPY16.9bn in earthquake-related charges for the half-year.