Japan: Kirin Holdings’ operation profit for last year likely up 10%

Kirin Holdings' operating profit for the year ended in December appears to have grown 10% to a record 155 billion yen ($1.41 billion), supported by strong sales of mainstay tea beverages and cost cuts, the Nikkei Asian Review reported on February 6.

That would top the Tokyo-based beverage giant's projection of a 7% increase to 152 billion yen. Sales likely declined 10% to about 1.89 trillion yen, compared with a forecast 5% drop to 1.97 trillion yen.

Profitability improved for the company's beverage business. Products with strong brand power such as Nama-cha green tea and Gogo-no-Kocha black tea sold well. And with promotional spending held in check, the segment's operating margin climbed to around 6% from 1.5% in 2015.

Drugmaking subsidiary Kyowa Hakko Kirin's new treatment for Parkinson's disease was among the new offerings to perform well.

Yet overall sales fell in large part due to the unloading of a Brazilian business, which pushed down annual sales by roughly 80 billion yen. The expiration of a license allowing the Japanese company to sell Anheuser-Busch InBev's Corona beer in Australia also took a toll.

In Japan, its top beer brands lacked momentum after a tax change last year pushed up retail prices and drove consumers to cheaper alternatives such as private-label beer and shochu cocktails. Sales of beer and similar products dropped 4% by volume to 128 million cases last year. Kirin attempted to shore up sales by reformulating the flavor and packaging of its signature beer Ichiban, but could not offset the negative impact.

Kirin is shifting to International Financial Reporting Standards for 2017 earnings. This is helping buoy the bottom line in light of changes in how amortization charges are handled for such assets as goodwill and brands. Net profit for the year is seen coming to 230 billion yen or so.

Kirin's profit is expected to continue growing this year, with signature beverages selling well. The company aims to sell roughly the same volume of beer and similar products in Japan as last year by taking such steps as rolling out no-malt beer, which is exempt from higher taxes. It will increase prices of beer for commercial accounts. With the potential for market growth limited in Japan, the company will step up efforts to lower costs.

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