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Kirin Forecast Misses Estimates on Australia, Japan Declines

Kirin Holdings Co. (2503), Japan’s largest brewer by market value, forecast 2012 earnings 23 percent less than analyst estimates as falling sales in Australia and Japan crimp profitability.

Net income may reach 48 billion yen ($618 million) in the 12 months ending Dec. 31, the Tokyo-based company said in a statement yesterday. That compares with the 62.5 billion yen average estimate of 16 analysts based on data compiled by Bloomberg.

Earnings from its Lion unit in Australia will miss budget as discounting by the nation’s biggest retailers stymies its ability to raise prices, higher ingredient costs curb profitability and stalling consumer demand cuts sales. Declines in the Japanese drinks market will result in revenue missing target and limiting the benefit of overseas acquisitions such as Brazil’s Schincariol Participacoes e Representacoes.

“We want to take a medium to long-term view for Lion,” President Senji Miyake told reporters in Tokyo yesterday.

Kirin expects 2012 earnings from Lion of A$96 million ($103 million), lower than the A$350 million target set in 2010, it said in a presentation on its website. Kirin owns Australia’s second-largest brewer and largest milk processor.

Lion’s management will focus on more profitable products, such as cheese and flavored drinks, to reduce the impact of plain milk discounting by retailers.

Kirin and rivals Sapporo Holdings Ltd. (2501) and Asahi Group Holdings Ltd. have expanded overseas to offset a slump in demand at home. Industrywide beer sales in Japan fell 3.7 percent to 442 million cases last year, the lowest level since records began in 1992.

Schincariol, San Miguel

Among other acquisitions last year, Kirin agreed to buy out shareholders in Schincariol Participacoes e Representacoes in November 2011. The deal at that time valued the Brazilian company at about $3.6 billion excluding debt, when combined with the initial purchase of a 50.45 percent stake.

The brewer increased its stake in Manila-based San Miguel Brewery Inc. (SMB) to 48 percent in 2009, bought a 14.7 percent of Singapore’s Fraser and Neave Ltd. (FNN) in 2010 and purchased a majority stake in Vietnam’s Interfood Shareholding Co. for an undisclosed sum in March 2011.

Kirin’s 2011 annual profit dropped 35 percent as the value of its Sydney-based Lion unit and investments declined. Net income fell to 7.4 billion yen in 2011 from 11.4 billion yen the previous year, the Tokyo-based company said yesterday.

Japanese Rivals

Kirin’s rival Asahi Group Holdings Ltd., which spent at least $1.8 billion on acquisitions in 2011, yesterday forecast 2012 profit will rise 18 percent, in line with analyst estimates.

Asahi, Japan’s largest brewer by volume, said net income may climb to 65 billion yen ($837 million) in the 12 months ending Dec. 31 from 55.1 billion yen in 2011, according to a statement yesterday. The forecast compares with the 64.9 billion yen average of 15 analyst estimates compiled by Bloomberg.

Kirin, Asahi and Sapporo were forced to temporarily shut factories after the March 11 earthquake in northern Japan. Beer shipments by the nation’s five biggest brewers plunged more than 8 percent in the months of March, May and June from a year earlier.

Sapporo forecast net income of 6.3 billion yen in 2012 and 7.4 billion yen in 2013, compared with the 7.95 billion yen mean estimate of five analysts for 2012 and 8.8 billion yen estimate for 2013.

The company posted 2011 net income of 3.2 billion yen, according to statement to Tokyo Stock Exchange.

Kirin’s shares rose 1.9 percent to 967 yen at the close in Tokyo yesterday before the earnings were released. Asahi climbed 0.8 percent to 1,731 yen, while Sapporo gained 0.7 percent to 294 yen.

To contact the reporters on this story: Cheng Herng Shinn in Tokyo at hcheng52@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net; Frank Longid at flongid@bloomberg.net

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