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Kirin Predicts Return To Profit After First Loss In 66 Years

Published on Feb 15 2016 10:25 AM in Drinks

Kirin Predicts Return To Profit After First Loss In 66 Years

Kirin Holdings Co. forecast that it will return to profit this year after posting its first annual loss since 1949, as the Japanese brewer announced plans to restructure the money-losing Brazilian business.

Net income will probably be 60 billion yen ($527 million) for the year ending December 2016, recovering from a net loss of 47.3 billion yen because of a 110-billion-yen impairment loss for the Brazilian unit, the Tokyo-based company said recently.

Booking the one-time loss "was gut-wrenching, but we had to drain the wound somehow," chief executive officer Yoshinori Isozaki said at a press conference in Tokyo. "Overseas strategy is very difficult. Cross-border M&A isn’t something that is easy," and the company won’t make any acquisitions just to seek scale, he said.

Kirin announced its annual loss and imposed temporary pay cuts on senior executives after an economic slump hurt its Brazilian unit. The company, which is already facing declining sales at home, will strive to rebuild the subsidiary so it will break even in 2018 and turn to a profit in 2019, Isozaki said. Selling some assets at the Brazilian business is also possible, he said.

Domestic Sales

Kirin, which gets more than 30 per cent of its sales overseas, is among Japanese beermakers seeking acquisitions abroad to offset falling consumption at home amid a shrinking and ageing population. In 2011, the brewer acquired Brazil’s Schincariol Participações e Representações , and last year bought a controlling stake in Myanmar Brewery Ltd, where the company will expand production and sales channels, it said.

Restructuring the Brazilian unit is part of the company’s three-year plan to "revitalise" Kirin. The brewer also plans to boost sales and profit of its core beer products at home by reinforcing the brands and seeking alliance opportunities for its soft-drink business, Isozaki said.

At home, Kirin is hoping to sell 140.6 million cases of beer and beer-like drinks in 2016, a 0.9-per-cent drop from last year, it announced last month. Japan’s beer consumption has declined since 2001, with more people turning to alternatives such as whiskey and wine.

Sales are expected to fall 2.6 per cent to 2.14 trillion yen in 2016, and Kirin said that it targets return on equity of 15 per cent or more by 2018.

Kirin shares closed 8.4 per cent higher at 1,593 yen in Tokyo before the announcement. The benchmark Topix gained 8 per cent.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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