Asahi cuts full-year outlook as overseas drive makes brewer vulnerable
Asahi Group Holdings Ltd. has once again cut its yearly revenue, and profit outlook as its $22 billion drive to overseas markets renders Japan’s biggest brewer more prone to currency fluctuations.
Consumption has also weakened in the domestic market.
stock company said, citing currency fluctuations and domestic headwinds, operating profit is likely to be 202 billion yen ($1.9 billion) for 2019. This compares with its forecast of 215.5 billion yen and the analyst’s average estimate of 215.9 billion yen.
In early trading in Tokyo on Tuesday, Asahi’s shares fell as much as 5.6 per cent, the most significant intraday decline since July. Before the latest change of forecast, the share had risen around 29 per cent this year.
Asahi has reduced its revenue outlook to 2.09 trillion yen relative to the 2.12 trillion yen average estimate. The proposed annual dividend has been rising from the previous 106 yen per share to 100 yen per share. Previously, the company had lowered its predictions in August.
The manufacturer of Super Dry beer is under pressure both from its string of overseas acquisitions over the past four years and from intense domestic competition for a reduced number of drinkers. Asahi’s foreign expansion has made it more vulnerable to foreign exchange rate fluctuations.
According to Tomonobu Tsunoyama, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co, the segment is still expected to be a profit driver in the future, despite the overseas drop caused by currency fluctuations. Further connected was the domestic market, where it was a worry that the firm was unable to raise profits and lack of revenue upswing before an October tax hike.
The implication of earnings was “negative,” Tsunoyama wrote to customers in a note. “Management has not been able to break the slide in domestic alcohol and soft drink earnings.” Chief Executive Officer Akiyoshi Koji has ramped up the overseas business of the brewer through deals, most recently spending around $11 billion to buy Australia’s largest brewer from Anheuser-Busch InBev in July. In the last fiscal year, overseas sales accounted for about 33 per cent of revenue, most of it from Europe.
Global beer consumption growth is flat-lining as younger drinkers choose local craft brews and lower-calorie drinks, or even cannabis-infused drinks for relaxation with no hangovers. Euromonitor estimates that over the next five years, the level of beer consumption will only rise by about 1.4 million annually on average.
Although his peers are trying to diversify from beer into businesses like cannabis or cosmetics, Koji has said that his goal is to make Super Dry a global brand and build up the worldwide presence of the brewer to four or five hubs from its current three hubs in Japan, Europe and Australia.