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Banking & Finance

Kirin draws down debt at a faster clip with eye on growth

Beverage giant seeks financial leeway for acqusitions

Jettisoning a money-losing Brazilian business has helped to improve Kirin's profitability.

TOKYO -- Kirin Holdings is rapidly reducing its interest-bearing debt, hoping to lay the groundwork for future growth investments as profitability improves.

Initially, the beverage giant planned to cut 135 billion yen ($1.22 billion) of its debt over the three years ending December 2018. It is now seeks to push the reduction to 220 billion yen by this December, President Yoshinori Isozaki told The Nikkei.

"We aim to have the flexibility to pursue such future growth investments as mergers and acquisitions. It will help us gather funding when we take the offensive," he said.

By the end of this year, Kirin aims to shrink its net interest-bearing debt to 370 billion yen, a cut of 40% from a year earlier. This will leave Kirin's debt at the lowest since 2006. The company is selling money-losing operations as well as properties in Hiroshima to obtain about 170 billion yen for repayment.

"Reflecting on past mistakes, we will proceed [with growth investments] with a cool head," Isozaki said, and "if our timelines do not match, we may review our dividend policy or buy back shares." The company will be examining such metrics as discounted cash flow to help guide its investment decisions. Regarding the potential purchase of a stake in Vietnam's state-owned Saigon Beer Alcohol Beverage, he said that "since we identify the Asia-Oceania region as a growth market, we are looking at the deal with interest."

Since rolling out restructuring plans in December last year, Kirin has enjoyed a boost in profitability. It sold off its struggling Brazilian business and began focusing more on its mainstay beverage products. The company expects group net profit to slide 4% to 114 billion yen for this fiscal year. By 2018, the beverage maker aims to reach at least 15% in return on equity. With Kirin's stock hovering around this year's high, investors appear to be applauding the company's efforts.

Looking ahead, Kirin will be focusing on its beer business. Beer consumption is on the decline in Japan and worsened starting in June, when the revised liquor tax law took effect and caused prices to rise. Isozaki hopes to avoid excessive outlays on promotions, saying that "it is foolish to fight over market share."

(Nikkei)

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