Kirin Snaps Four Days of Losses After Profit Beats Forecast

Updated on
  • Company raises profit forecast due to one-time Australia gain
  • Brewer trimmed sales forecast on struggling Japan beer sales

Kirin Holdings Co. snapped four days of losses after reporting first-half operating profit beat its own forecast by 25 percent.

Operating profit rose 1.5 percent to 58.8 billion yen ($581 million) for the six months ended June from a year earlier on increased sales of soft drinks domestically and growth in its pharmaceuticals and bio-chemicals operations, the Tokyo-based company said Thursday. Japan’s second-biggest Japanese brewer also upgraded net income projections for the year by a third to 80 billion yen due to a one-time gain at its Australian unit.

The company’s shares rose as much as 3 percent in Tokyo trading Friday, after dropping 8.8 percent over the previous four days. The benchmark Topix index declined 0.2 percent.

Kirin’s improved net income forecast highlights a recovery from its 2015 annual loss, the brewer’s first in 66 years as the company restructured its money-losing Brazilian business. Japan’s brewers are seeking ways to offset slowing sales domestically, where an aging population and economic concerns have damped beer consumption.

Conservative Guidance

Second-quarter net income rose 18 percent to 23.4 billion yen. It raised operating profit projections by 1.6 percent to 127 billion yen for the year ending 2016.

“We think second-half guidance has some conservative aspects. Overall, the business is finally moving in the right direction with the company committed to steadily shoring up earnings,” Yoshiyasu Okihira, a Tokyo-based analyst at SMBC Nikko Securities Inc., wrote in a note Thursday.

Kirin cut its domestic beer sales target for the year by 1.7 percent and trimmed the overall sales forecast by 2.8 percent.

To counter sluggish sales domestically, many of the country’s beer makers are expanding overseas, with Asahi Group Holdings Ltd. clinching a deal to buy the Peroni, Grolsch and Meantime beer brands in Europe from Anheuser-Busch InBev NV.

“Beer sales have been struggling unexpectedly as rivals threw new products into the market, especially beer-like drinks,” in Japan, Kirin Senior Executive Officer Teruyuki Daino said in a briefing in Tokyo Thursday. “In the second half we want to catch up by carrying out various promotions.”

Kirin’s subsidiary Lion Pty is expected to receive a payment of as much as A$300 million ($229 million) in the second half after a contract to distribute Anheuser-Busch InBev’s imported beer brands in Australia was terminated, the Japanese brewer said in June.

The company’s pharmaceuticals and bio-chemicals division contributed 16 percent of revenue in 2015, while overseas beverages took up 28 percent and Japanese drinks sales accounted for 54 percent.