UPDATE 2-Lion Nathan H1 profit up 7 pct, maintains forecast

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By Victoria Thieberger

MELBOURNE, May 20 (Reuters) - Lion Nathan Ltd LNN.AX, Australia's second-largest brewer, beat forecasts with a 7 percent increase in first-half net profit, boosted by premium beer sales, but left its full-year forecast unchanged.

The brewer warned input costs, including malt, sugar and packaging, would rise in the second half and again in 2009. But its shares jumped as much as 8 percent to a six-week high as analysts believed the worst of the cost increases was over and that higher-priced beers would continue to deliver strong earnings.

"It is plain conservatism to keep the full-year guidance in place," said Fortis Investment Partners analyst Theo Maas, given the stronger-than-expected first half.

He said the shift in the timing of Easter to March explained part but not all of the first-half improvement. He added that Lion Nathan was also the biggest beneficiary of a market trend in Australia towards higher-margin premium beers.

While total beer volume rose 0.6 percent in the half, revenue was up 6.6 percent as more drinkers switched to expensive brands.

Lion Nathan was up 3.4 percent at A$8.71 at 0130 GMT.

For 2008, Lion Nathan confirmed net profit is expected to be between A$265 million and A$275 million ($252-261 million), little changed from A$267.2 million last year mainly because of costly upgrades to equipment at its breweries.

Lion Nathan (LNN.NZ), which brews Tooheys, Hahn and XXXX beers, said net profit for the six months to March 31 before one-off items rose to A$167.7 million ($159.7 million) from A$156.8 million last year. That was above market forecasts of A$159.6 million in a Reuters survey of eight analysts.

The result includes sales from premium brewer James Boag for the first time. Lion bought the brewer in November for A$325 million and said on Tuesday integration was ahead of plan.

Lion Nathan, which is 46 percent owned by Japan's Kirin Brewery Co (2503.T), said it expected a significant step-up in profits in 2009 from Boag's sales and the completion of brewery upgrades.

STEP-UP IN 2009

Chief Executive Rob Murray told reporters he was comfortable with analysts' forecasts for 2009, which centre on a 12 percent increase in net profit to A$307 million, according to Reuters Estimates.

Fortis's Maas said the target was achievable despite slow growth in the overall Australian beer market, helped by Lion's focus on premium brands.

"It sounds like a very reasonable number given that Boag's will add about 5 percent and the cost efficiencies are coming through as well," Maas said.

Lion, which has a market share of 44.5 percent and competes with Foster's Group Ltd (FGL.AX) in a beer duopoly in Australia, said premium beers contributed strongly to revenue growth, particularly Hahn Super Dry and the recently released Barefoot Radler.

"We are seeing big shifts in our market as consumers shift to low-carb, mid-strength and premium beers, and away from traditional mainstream and light beers," Murray said.

The brewer said input costs would rise again in 2009 by A$30-36 million or about 5-7 percent, but about half of this was due to the higher cost of packaging including glass bottles for more expensive premium beers.

It said growth in ready-to-drink mixed spirits was expected to slow significantly after recent government tax rises designed to discourage teenage binge drinking. ($1=A$1.05) (Editing by Kim Coghill)