February 13, 2014 6:37 am JST

Asahi aims for 14th year of record net profit in 2014

TOKYO -- Beverage giant Asahi Group Holdings Ltd. said Wednesday it expects to grow group net profit by 9% in 2014 to 67 billion yen ($647 million), which would mark a 14-year streak of record profit.

     Although the consumption tax hike in April is seen weighing on performance initially, the firm expects to rise back in the summer and beyond, touting its broad variety of offerings including premium beer and soda.

     Sales are projected to increase 2% to 1.75 trillion yen, driven by alcoholic and soft drinks sales in Japan. On Feb. 18 the firm will roll out high-end Dry Premium beer, which was released only in gift packages last year, with a plan of tripling sales volume on the year.

     The firm hopes to increase sales of malt-free beer as well, aiming to sell 163 million cases of beer products, up slightly from 2013. This would outperform the overall market, in which sales volumes are seen falling 2-3%.

     In the soft drink business, in addition to its mainstay carbonated offerings such as Mitsuya Cider and Wilkinson, the firm will expand its tea beverage lineup.

     The company expects to grow operating profit by 5% to 123 billion yen. For the first six months through June, the profit is expected to come 37 billion yen, or 30% of the full-year guidance, with the higher sales tax seen weighing on consumption.

     "The impact of the tax increase will fade by the summer peak-consumption season, and demand will recover," says Yoshihide Okuda, a director and corporate officer.

     For the second half starting in July, operating profit is forecast to climb to 86 billion yen. Cost-cutting efforts such as in-house production of plastic bottles will likely help as well.

     The profitability of overseas business is improving as well. Although operating results will likely come in negative again this year, the loss is expected to shrink 4 billion yen on the year to 600 million yen. The acquisition of a popular beverage brand in Indonesia and consolidation of logistics bases in Oceania will help boost profitability.

     At the end of January, Asahi's market capitalization topped that of rival Kirin Holdings Co. for the first time since listing. Although Kirin's market cap is once again higher, Asahi may have a chance of surpassing Kirin if its international operations' profitability improves better than planned.

     For 2013, Asahi generated 61.7 billion yen in net profit, up 8% on the year, on sales of 1.71 trillion yen, a gain of 9%.