Lion Nathan boss Gordon Cairns said yesterday that the drinks group's wine sector is heading in the right direction in spite of a drop in earnings in the year 2002-2003.

The wine division saw a plunge in earnings by 80% to A$4.1m in the year to 30 September. But Cairns believes that the company has the right strategy to turn around its premium wine business, and urged investors to be patient while the group worked to turn the business around.

"We're at the top end of the market, it's a very small and it's a very narrow niche, but it's a large one, there's a billion dollars of profit there available," he told the Nine Network.

Last week Lion Nathan, whose brands include Tatachilla and Preece, reported an overall rise in net profit by 11.2% to $180.1m for the year 2002-2003, and predicted a net profit climb for 2003-2004 by between 8% and 11%. The fall operating profit for the wine division was attributed to a A$6.8m writedown of inventory.

Cairns ruled out any acquisitions until the wine business improved. "Our shareholders are not out there saying go buy wine companies," he said. "We can be patient and if something comes up at the right price then we might be interested."