Price War Cuts Sleeman’s Profit and Stock

Article Excerpt

SLEEMAN BREWERIES LTD. $11 (Toronto symbol ALE; SI Rating: Average) earned $0.03 a share (total $539,000) in the three months ended December 31, 2005, down sharply from $0.23 a share ($3.9 million) a year earlier. Revenue fell 7.8%, to $49.6 million from $53.8 million, due to intense competition from smaller regional brewers that receive provincial subsidies. That lets them sell beer at much lower prices than larger brewers like Sleeman. Sleeman is now broadening its current cost cutting plan. Consequently, these moves will lead to a $2 million one-time charge in the first quarter of 2006. But the plan should save Sleeman $2.7 million a year, including $1.7 million in 2006. The stock will probably make little progress until the benefits of the restructuring materialize, or beer prices rise again. But Sleeman’s recent drop could make it a takeover candidate for a foreign brewer with the size to survive this price war. Sleeman is still a buy for aggressive investors. investors…