Lion, the Australian food and beverage group, has reported an 11% drop in underlying half-year volumes amid pressure on modified white milk sales and the loss of some own-label contracts.

The company, owned by Japan’s Kirin Holdings, said total underlying volumes from its combined dairy and drinks division fell 11% in the six months to the end of March.

Lion said the result allowed for its move in May 2015 to sell its everyday cheese business to Canada’s Saputo.

Nevertheless, Lion insisted its three-year “turnaround programme” remains “on-track”.

Lion pointed to growing sales among parts of its dairy and drinks portfolio. It said sales of Dairy Farmers Thick & Creamy yogurt grew by 2.7% in value during the period. The company also flagged the 4.3% growth in sales seen by Yoplait Petit Miam. Lion holds the local licence for Yoplait, which is owned by General Mills.Yoplait Petit Miam. Lion holds the local licence for Yoplait, which is owned by General Mills.

“Lion Dairy & Drinks remains focused on optimising the performance of its supply chain and manufacturing footprint to accelerate its business turnaround,” it added.

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By GlobalData

The company has announced plans to invest in the production of white-milk and milk-based drinks in the east of Australia.

In January, Lion said it would upgrade production at its Bentley dairy in Perth – but confirmed that the move will see job cuts at the site’s warehouse operations.

The exit from everyday cheese and loss of contracts to supply own-label milk was central to Lion recording a 2.1% fall in group underlying net sales. 

Work to focus on “higher-value product categories” led Lion to generate a 2% increase in underlying group operating earnings, CEO Stuart Irvine said.

Irvine noted the company’s Lion Asia Dairy unit “continued its solid start”. He added: “We already enjoy category-leading yoghurt brands in Singapore and Hong Kong.”

A report in The Australian Financial Review today claimed Lion had decided to put its fledgling stand-alone dairy unit in Asia into its overall dairy and drinks business.

The company could not be reached for immediate comment.