Asahi Cuts Full-Year Forecast For Second Time in Four Months

(Bloomberg) -- Asahi Group Holdings Ltd. lowered its annual sales and profit forecast again as its $22 billion push into overseas markets makes Japan's largest brewer more vulnerable to currency swings, as consumption weakens at home.

Operating profit will probably be 202 billion yen ($1.9 billion) for 2019, the Tokyo-based company said Tuesday, citing currency fluctuations and domestic headwinds. That compares with its prior forecast of 215.5 billion yen, and the average analyst estimate of 215.9 billion yen.

The shares of Asahi fell as much as 5.6% in early trading in Tokyo, the biggest intraday decline since July. The stock had climbed about 29% this year before the latest change in outlook.

Asahi also lowered its sales forecast to 2.09 trillion yen, compared with the average estimate for 2.12 trillion yen. Its annual planned dividend was cut to 100 yen per share, from the prior 106 yen per share. The company had previously lowered its forecasts in August.

CEO Defends Spending $22 Billion Building Asahi's Beer Empire

The maker of Super Dry beer is under pressure from both its string of overseas acquisitions in the last four years and intense domestic competition for a shrinking number of drinkers. Asahi's expansion abroad has made it more vulnerable to swings in foreign exchange rates.

Despite the overseas drop caused by currency fluctuations, the segment is still expected to be a profit driver in the future, according to Tomonobu Tsunoyama, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. More concerning was the domestic market, where the company's inability to boost earnings and lack of sales uptick before an October sales tax hike was a concern.

The earnings implication was “negative,” Tsunoyama wrote in a note to clients. “Management has not been able to put the brakes on the slide in earnings in the domestic alcohol and soft drinks operations.”

Chief Executive Officer Akiyoshi Koji has been ramping up the brewer's overseas business through deals, most recently spending around $11 billion to purchase Australia's largest brewer from Anheuser-Busch InBev in July. Overseas sales made up about 33% of revenue in the last fiscal year, most of that from Europe.

Growth in global beer consumption is flat-lining as younger drinkers are choosing local craft brews and lower-calorie drinks, or even opting for cannabis-infused beverages for relaxation with no hangovers. Euromonitor predicts that beer consumption volume will grow only around 1.4% annually on average in the next five years.

Although his peers are trying to diversify out of beer into businesses such as cannabis or cosmetics, Koji has said that his aim is to grow Super Dry into a global brand, and build up the brewer's worldwide presence to four or five hubs from its current three of Japan, Europe and Australia.

To contact the reporter on this story: Lisa Du in Tokyo at ldu31@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Reed Stevenson

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