Trans-Tasman beer and wine group Lion Nathan has reported a 12% rise in full-year net profit to A$226.8m (US$173.3m) - but warned rising costs would hit profits for the current fiscal year.

Lion posted a 3.2% increase in operating profit after tax to $257.4m, while EBIT rose by 1.9% to $540m. Lion, which makes products including Tooheys beer and Tatachilla wine, also reported a 5% rise in net sales up to $1.8bn.

However, for the year ahead, Lion warned that it would be hitting "a cost headwind", particularly in sugar and aluminium, which would affect profitability.

The company is now forecasting group net profit for 2007 of A$245m to A$260m, against previous analysts' forecasts of around A$262.7m. The announcement saw Lion's shares fall by 3% today (13 Nov) to A$8.13.

For the year to 30 September, Lion saw contrasting performances from its businesses in Australia and New Zealand.

Earnings in Australia rose 4.1% to $394.8m, benefiting from planned brand investments and the company's move into the RTD sector. Lion said the response to the launch of Bourbon brand McKenna Straight Kentucky in full-strength and RTD versions had been very positive and distribution for the brand would be expanded in 2007.

Other highlights in Australia included 20% volume growth for its international premium brands and 4.2% volume growth for the Australian "power" brands, including "standout" performances from XXXX Gold, Tooheys Extra Dry, Heineken and Beck's.

However, Lion saw profits in New Zealand fall 3.9% to NZ$86.8m (US$57.6m) due to rising competition throughout the year. Lion's spirits sales in New Zealand were also hit by the loss of its distribution rights to brands formerly owned by Allied Domecq during the year.