DB Looks To Significant Earnings Boost

DB Looks To Significant Earnings Boost

DB Breweries' directors believe a significant increase in earnings will flow from the company's recent investment which included the amalgamation of previously separated divisions to one Otahuhu site.

"We are now in a position to achieve benefits in all aspects of our business," said company chairman David Sadler this afternoon at the company's annual general meeting in Auckland.

"Your company has had a good result given a relatively slow start to the 2002 fiscal year and inevitable impact of the major capital expenditure programme."

Mr Sadler noted that the company was one of only four New Zealand listed companies to achieve a silver award (there were no gold awards) in the NBR/L.E.K Consulting scorecard published in November last year for the 30 June 2002 year.

He said that while the company was able to claim a shareholder rate of return (SROR) of around the current weighted average cost of capital (WACC), the directors believed they could improve operational performance further to add value to shareholders' investments.

"The final act to underline the focused nature of our brewing business was as at 1 April 2002 to amalgamate the previous parent company, DB Group Limited, with the main operating company, DB Breweries Limited, having earlier been Magnum Corporation (until December 1992)," said Mr Sadler. Following the name change to DB Breweries, the company's corporate logo had also been revised.

Brian Blake, Managing Director of DB Breweries said that while volume and market share were unchanged, net sales had improved by 3%. Two factors had driven this increase - a strong performance from DB's premium brands and a price increase implemented in June.

"While the company continued to drive its strategy of improved efficiency and effectiveness in all areas of its business, a key decision was made to significantly upweight marketing spend ? related to the company's growth aspirations for Tui and Heineken," said Mr Blake.

Addressing the five brands driving DB's portfolio ? Heineken, Monteith's, Tui, Export Gold and DB Draught ? Mr Blake reported that Heineken had another outstanding year, once again achieving double-digit growth.

Mr Blake said that since its launch in New Zealand eight years ago, Heineken had pioneered the country's premium beer market and had established undisputed leadership in the segment.

Monteith's was another brand to achieve double-digit growth and it firmly cemented its place as New Zealand's premium craft beer brand. Mr Blake said the popular seasonal beers had once again raised awareness of the brand.

"Monteith's Summer Ale was released in November 2001 and sold out much earlier than forecast. The problem has been overcome this summer by more than doubling production."

Mr Blake acknowledged the great year for Tui, which had spread its wings beyond its traditional market of the lower North Island where it is the biggest selling mainstream beer. "Increased sales in Auckland and the official launch of the beer in the South Island saw Tui achieve double-digit growth in this extremely competitive segment."

Meanwhile, the position of New Zealand's number one mainstream lager was maintained by Export Gold, through a range of marketing activities focused on 'where the action is'.

Mr Blake said that, while the company's five major brands continued to drive the business forward, the company continued to look to new credible brands for the portfolio.

During 2002, DB took over the New Zealand distribution of the Tiger brand ? one of the world's most enjoyed premium Asian beers sold in 55 countries and awarded more than 30 international gold medals for taste and quality.

The managing director said that DB's innovation would increase as it looks for new customers, new drinking occasions and endeavours to conduct its business in a more efficient and effective manner.

Mr Blake closed his address with personal thanks to retiring chairman David Sadler and board member John Cronin.

Tan Yam Pin also retired from the board in September. New members welcomed to the board include Dr Han Cheng Fong, Norman Geary and Herman Hofhuis.

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