Asahi Breweries Ltd. said on 20 February that it made a record net profit in 2001, taking the spotlight away from Kirin Brewery Co. Ltd., which is still suffering after losing the top spot in Japan“s…
Asahi Breweries Ltd. said on 20 February that it made a record net profit in 2001, taking the spotlight away from Kirin Brewery Co. Ltd., which is still suffering after losing the top spot in Japan“s beer market. Asahi said it had a better-than-expected group net profit of JPY 13.62 billion, a turnaround from its loss of JPY 15.71 billion in 2000 caused by stock appraisal losses and pension fund shortfalls. In contrast, Kirin posted a 30% slide in group net profit to JPY 23.12 billion, roughly in line with expectations, hurt by an 8% fall in sales of beer and happoshu – a low-malt beer alternative. “We just were not able to meet the customer wishes,” Kirin managing director Yoshikazu Arai told a news conference about the fall in beer and happoshu revenues. For 48 years Kirin ruled Japan“s beer market, but Asahi vaulted to the top spot in 2001 in terms of market share after tapping into the booming happoshu market with a brand of its own. Kirin posted a 1.2% decline in sales to JPY 1.56 trillion, compared to Asahi“s 2.4% rise to a record JPY 1.43 trillion. Kirin still records larger consolidated revenues thanks to subsidiaries such as 46% owned Australian brewer Lion Nathan Ltd. Operating profits in 2001 also sagged at Kirin, down 20.5% to JPY 75.07 billion. Asahi managed to post a 1.6% rise in operating profit to JPY 77.78 billion despite a JPY 2.2 billion operating loss at subsidiary Asahi Soft Drinks Co. Ltd. Asahi expects its good fortune to continue in 2002, with a net profit forecast of JPY 22 billion, a 62% rise, on consolidated sales of JPY 1.47 trillion. Kirin also forecast an upturn in net profit to JPY 29 billion, up 25%, on revenue growth of 2.6% to JPY 1.6 trillion, as the company aims to tighten its grip on the canned chuhai business. Chuhai is a fruit-flavoured alcoholic beverage. Both brewers also announced share buy-backs, Kirin before the stock market closed, Asahi after. Kirin said it would buy back up to 30 million of its own shares, representing up to 3% of its total shares outstanding, for JPY 30 billion. Asahi announced it would buy back up to 60 million of its own shares, or 11.6% of its outstanding shares, for up to JPY 60 billion. Shares in Asahi closed up 2.3% at JPY 1,024 before the earnings statement, while Kirin shares rose 4.09% to JPY 891. Both companies intend to hold the shares as treasury stock. The buybacks are not expected to affect the company“s per share valuations, but they should support the share prices, which have been battered with the downturn in the broader market. Asahi“s shares are down about 29% from their 2001 high in May while Kirin“s stock is down about 35% from their high the same month. With Japan still in a decade-long economic slump, changes in the drinking habits of cost-conscious consumers have helped to boost sales of low-cost happoshu, which is taxed at a lower rate and now accounts for a third of beer consumed in Japan. But the party may soon be over as a looming government tax rise threatens to erase happoshu“s 30% discount over regular beer, and brewers including Asahi and Kirin are scrambling to tap into new markets and growth areas. In December 2001, Kirin spent more than JPY 100 billion to buy a 15% stake in Philippine brewer San Miguel Corp., the food business of Takeda Chemical Industries Ltd. plus bourbon whiskey brand Four Roses from Diageo Plc and Pernod Richard. Kirin has forecast a current profit – which is pretax and excludes extraordinary items – of JPY 77 billion for 2002 but said that the acquisitions could boost this by JPY 4 billion. Asahi was less active but acquired Japan“s Kyowa Hakko Kogyo Co. Ltd. alcohol business for JPY 20 billion on 18 February, which will give the brewer access to the niche “shochu”, or distilled liquor, business.