E-Malt.com News article: 2219

Two of Japan's top brewers, Asahi Breweries Ltd and Sapporo Holdings Ltd said on February 20 profits surged in 2003 as cost cuts offset a slump in domestic beer sales, with Asahi forecasting an even better 2004. Japanese beer makers, faced with a steep contraction in the domestic beer market due to a shift in consumer tastes, have been aggressively cutting costs and diversifying their product lineups to make up for sales shortfalls in their core business, according to Reuters.

The belt-tightening measures convinced investors that profits would improve, helping boost Asahi's stock price by 24 percent and Sapporo's by 43 percent in 2003, far outperforming a 10 percent gain in the Tokyo Stock Exchange's food index.

Asahi, Japan's top beer maker known for its flagship "Super Dry" beer, said its net profit in 2003 soared 57.3 percent to 23.21 billion yen ($216.9 million). Besides cost cuts, its bottom line was boosted by strong sales of "happoshu", a low-malt beer substitute, and "shochu" distilled spirits. The figure beat the consensus estimate of 22.7 billion yen in net profit by 12 analysts in a Reuters poll. Revenues totaled 1.4 trillion yen, up 1.8 percent. The company expects net profit to climb 12 percent to a record 26 billion yen in 2004. "Beer is our mainstay product, but we also hope to stress growth products, such as shochu and low-alcohol products," Asahi's Executive Vice President Sugao Nishikawa told a news conference. In 2003 Asahi also enjoyed strong sales of "chuhai", an alcohol-laced fruit-flavoured drink, after it acquired the alcohol divisions of Kyowa Hakko Kogyo Co Ltd and Asahi Kasei Corp in 2002.

Despite a one percent contraction in the overall market in 2003, Asahi's happoshu sales increased by 15.5 percent on the back of strong sales of its "Aquare Blue" brand launched in July. Rain and cool weather in July, and a tax hike on happoshu in June, hit total Japanese shipments of beer and happoshu. Those shipments fell 6.3 percent in 2003, after a 2.6 percent fall the previous year. Ahead of the announcement, Asahi's shares closed down 0.98 percent at 1,012 yen. The benchmark Nikkei average ended down 0.31 percent.

Third-ranked Sapporo also reported strong results on Friday, saying its net profit doubled to 2.41 billion yen in 2003 thanks to cost cuts and a special profit in its real estate business. But unlike rival Asahi, Sapporo said its net profit in 2004 would total 2.2 billion yen, down 8.7 percent from 2003. Sapporo said it didn't plan any further real estate sales this year and that would impact its earnings, but said it hoped that new cheaper beer products, especially its Draft One pea-based beer launched earlier this month, would boost sales. Sapporo's announcement also came after the close. Its shares finished down 1.17 percent at 337 yen.

Japan's No.2 beer maker, Kirin Brewery Co, reported on February 19 a 0.4 percent fall in net profit for 2003 after asset write-downs and other reforms, but said it sees profit jumping 32 percent in 2004. ($1=107.00 yen).


20 February, 2004