Australian food and drinks group Lion has warned its dairy division continues to face “significant” margin pressures as it reported falling profits for 2011.
For the 12 months to the end of September, Lion’s dairy unit delivered EBIT of A$90.3m, a fall of 49.4% on the year.
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Sales slid 10.1% to A$2.81bn (US$3.01bn), driven by the loss of key private label contracts and deep discounting on white milk.
The unit also contributed to the “majority” of a A$1.2bn impairment charge recorded by Lion during the year.
Lion said that, despite the “challenging environment” in white milk and juice, it saw a “strong” performance in dairy beverages and speciality cheese.
However, it added: “Lion’s dairy and drinks division continues to face significant margin pressures in both dairy and juice. Lion has quality dairy and drinks brands that require investment to reach their full potential and remains committed to patient investment in a portfolio of high potential brands to deliver sustainable growth over the long term.”
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By GlobalDataIn the 12-month period, Lion’s parent Kirin Holdings reported a 35% drop in net income to JPY7.41bn (US$95.3m) due to lower sales and to JPY10bn in impairment charges, including the charge on its Australia dairy and juice business.
Sales were down 4.9% at JPY2.07trn. Operating income fell 5.8% to JPY142.86bn.
Nonetheless, the Japanese food and beverage maker said it expects its profits to rebound in 2012.
