Kirin Holdings expects strong rise in Schincariol profits

Kirin Holdings expects strong rise in Schincariol profits

Kirin Holdings has said that it plans to increase profits from its overseas beverages business by almost 80% in the year ahead.

The overseas beverages unit, which is led by Lion in Australia and Schincariol in Brazil, is expected to generate JPY27.5bn (US$354m) in operating profits in 2012, said Kirin in its full-year accounts, published at the end of last week. In the 12 months to the end of 2011, the unit's operating profits were JPY15.3bn.

In the past eight months, Kirin has acquired 100% of Schincariol via two deals totalling BRL6.3bn (US$3.4bn). The Japanese brewer has installed a new management team at Schincariol. The group is Brazil's second largest beer maker behind Anheuser-Busch InBev's AmBev unit but has relatively weak profitability. Kirin said last week that it will make "drastic" improvements to Schincariol's raw materials procurement. This is expected to improve profits in 2012, when Schincariol should contribute JPY5.5bn in operating profits to Kirin's overseas beverage business.

While Kirin is also seeking to premiumise Schincariol's beer portfolio, this is a longer-term project and forms part of Kirin's beyond its current 2015 Vision strategy.

"This acquisition is the first step in our plan for further growth beyond the goals of 2015," Kirin's CEO, Senji Miyake, told analysts last year. That said, the Japanese group still expects Schincariol's net sales to increase by 10% per year under its stewardship.

Kirin's profits outlook for the overseas business came alongside its report of a slump in full-year net profits. As the firm warned previously, net profits for the 12 months to the end of December sank by 35% to JPY7.4bn.

Write-down charges at the firm's Lion beer and food business in Australia damaged results. Lion is expected to recover ground in 2012.

A worse-than-expected fall in group net sales also hit Kirin's profits in 2011. Group net sales dropped by 5% on 2010, to JPY2.07tn, partly due to ongoing decline for consumer drinks demand in its native Japan. Operating profits fell by almost 6% to JPY142.8bn.

Despite this, Kirin expects net sales and operating profits in 2012 to increase by 7.7% and 13.4% respectively.

For the full Kirin figures, click here.