Suntory Beverage Forecast Lags Estimates as Demand Slows

Suntory Beverage & Food Ltd., the second biggest soft-drinks maker in Japan, forecast annual profit that missed analyst estimates as demand slows.

The beverage maker yesterday projected net income of 35 billion yen ($344 million) for 2014, trailing the 38 billion yen average of nine analysts’ estimates compiled by Bloomberg.

Profit growth at the maker of Boss-brand canned coffee and Orangina soda will slow as higher taxes damp demand in Japan and the weaker yen pushes up material costs, according to President Nobuhiro Torii. Suntory Beverage derived more than 60 percent of its sales from the domestic business last year.

Operating profit at the domestic business will increase 5.7 percent to 48 billion yen this year, slower than the 28 percent pace in 2013. Sales in the home market is projected to climb 3.2 percent to 740 billion yen.

Operating profit at the overseas business will probably rise 20 percent to 60.5 billion yen in 2014, faster than the 19 percent growth last year.

Suntory Beverage, which agreed in September to buy the Lucozade and Ribena drink brands from GlaxoSmithKline Plc for 1.35 billion pounds ($2.25 billion), plans to sell 428.7 million cases of soft drinks domestically this year, 3 percent more than in 2013, it said in a January statement.

That compares with a 5 percent growth plan at Kirin Holdings Co. and a projection for a 15 percent increase at Asahi Group Holdings Ltd.’s soft-drinks unit.

Net income rose 33 percent to 31.2 billion yen in 2013, while sales climbed 13 percent to 1.1 trillion yen, it said.

Shares of Suntory Beverage fell 1.5 percent to 3,380 yen at the close in Tokyo trading, before the earnings announcement. The stock has gained 0.8 percent this year compared with a 12 percent drop in the Nikkei 225 Stock Average.

Market Share

Suntory Beverage, which trails Coca-Cola Co. in Japan, increased its domestic market share by 0.5 percentage points to 20.1 percent last year, according to researcher Inryosoken. Coca-Cola had 27.3 percent share and Asahi controlled 12.5 percent of the market, the researcher said.

Suntory Beverage was listed in July after an almost $4 billion initial public offering, Asia’s biggest last year. The soft-drinks company aims to achieve 2 trillion yen in sales and 200 billion yen in operating profit by 2020, it has said.

Suntory Beverage is the soft drinks unit of closely held liquor maker Suntory Holdings Ltd. The parent company agreed last month to buy U.S. bourbon maker Beam Inc. for $16 billion.

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