E-Malt.com News article: 4354

Japan: Asahi Breweries Ltd., Japan's largest beer-maker, may borrow to finance acquisitions of Asian alcohol and beverage companies, such as South Korea's Jinro Ltd., Bloomberg cited the Chairman Shigeo Fukuchi on March 4.

Tokyo-based Asahi Breweries, which last month said that it may spend as much as 100 billion yen ($950 million) for purchases of companies by December 2006, may tap banks for funds needed beyond that total, Fukuchi said. “We may spend more than 100 billion yen and we can borrow money for that, in addition to using our own cash flow,'' Fukuchi said in an interview. “We are especially interested in Jinro's soju (liquor) operations in Japan for the strong name recognition.''

Asahi and its larger rival Kirin Brewery Ltd. are diversifying their alcoholic and non-alcoholic product lines and expanding overseas to counter shrinking domestic beer demand. Japan's regular and low-malt beer shipments fell 4.2 % in 2004, extending the declines to a third year.

Seoul-based Jinro, which owes creditors 2.8 trillion won ($2.8 billion), said in a statement last month that 14 bids were submitted by companies or investment groups it didn't identify. The deadline for bidding for Jinro, South Korea's largest liquor maker, is March 30. Jinro began selling soju in Japan in 1979 and had 27.2 billion yen in sales in 2003, the most recent figure available, said Son Kumsu, a spokeswoman for Tokyo-based Jinro Japan Inc.

Asahi Breweries rose to a 52-week today and closed at 1,395 yen, a gain of 0.7 percent, on the Tokyo Stock Exchange.

Asahi Breweries' debt totaled 806.1 billion yen as of the end of 2004, down from 828.7 billion yen a year earlier, the company said on its statement distributed through the Tokyo Stock Exchange. Ratings companies Moody's Investors Service and Standard & Poor's hold `stable' outlook recommendations for the brewer's debt. “Buying existing companies, such as Jinro, is an easier way to add more alcohol beverage offerings, instead of starting a new brand on our own,'' Fukuchi said. “We should not miss opportunities for acquisitions, even if we need to borrow.''

Regular and low-malt beer businesses generated 91.6 percent of Asahi's overall operating profit, or sales minus the cost of goods sold and administrative expenses, in 2003, while it expects that figure to drop to about 70 percent in 2006, by the end of its three-year business plan. It expects to generate about 8 percent of operating income in 2006 from sales of other alcohols, such as wine, soju, and cocktails, Okajima said yesterday.

Asahi said last month that it expects to generate a total cash hoard of 200 billion yen by December 2006. Half of that money will be used for acquisitions, share buybacks and increased dividends, and for paying debt. It generated 72.8 billion yen of cash in 2004, spokesman Toru Okajima said yesterday.

Lotte, which controls South Korea's biggest department store operator, CJ Corp. and Doosan Corp., which makes alcoholic beverages, are among companies filing expressions of interest with sale arranger Merrill Lynch & Co. Asahi said last month it is considering bidding with Lotte.

Japan's total shipments of soju rose 9 percent last year from a year earlier, Asahi's Okajima said. Soju, a clear liquor distilled mainly from potatoes, accounted for about 10 percent of alcohols consumed and taxed in Japan during 2003, up from 8.7 percent a year earlier, Japan's Tax Agency said on its Web site.



05 March, 2005