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Myanmar Crisis

Japan's Kirin writes off $193m for Myanmar beer unit

Military-linked foreign businesses hit by double whammy of February takeover and COVID

As citizens protested the coup, Myanmar Brewery, in which Kirin owns 51%, became the target of a boycott as many restaurants stopped serving the brand.   © Reuters

TOKYO -- Overseas businesses with links to the Myanmar military, such as Japan's Kirin Holdings, are reporting losses amid a shaky market outlook exacerbated by the military takeover in February.

Kirin Holdings on Tuesday posted an impairment loss of over 21.4 billion yen ($193 million) in the six months through June on account of its beer production businesses in Myanmar.

The brewery said in a statement that the loss was recorded "considering the outlook for a continuing high level of uncertainty of the operating environment and increase in the country risk due to the circumstances in Myanmar in turmoil caused by the [takeover] which occurred in February 2021."

Kirin owns 51% of two beer production companies, Myanmar Brewery and Mandalay Brewery. The rest of both companies is owned by Myanma Economic Holdings, a conglomerate that serves as a welfare fund for Myanmar's military. Myanma Economic Holdings, along with senior military officers and other military-affiliated companies, has been sanctioned by the U.S. and other countries.

As citizens protested the takeover, Myanmar Brewery became the target of a boycott, and many restaurants stopped serving the brand. The crackdown by security forces on protesters and the spread of COVID-19 caused sales to drop to 152 billion Kyat ($92.3 million) in the first six months of the year, down 28% from a year earlier.

Myanmar Brewery revised down its revenue forecast for the year ending December from 489 billion kyats to 290 billion kyats. Normalized operating profit was revised down from 202 billion kyats to 87 billion kyats.

Kirin announced in February that it has "no option but to terminate our current joint-venture partnership with Myanma Economic Holdings,"  but no significant progress has been made. The company plans to ask Myanma Economic Holdings to sell its shares to Kirin or local companies that are not affiliated with the military, but "we haven't had an official negotiating table," said a person in Kirin involved in the matter.

“We are not considering withdrawal from Myanmar at this moment. We are still discussing the negotiation [to terminate the joint-venture with Myanma Economic Holdings], but the current Covid-19 situation makes it difficult to proceed”, Toru Yoshimura, Senior Executive Officer of Kirin said at an online press briefing on Tuesday.

Kirin invested in Myanmar in anticipation of future growth in the domestic demand and its business there had formed an important pillar of its overseas expansion. Although the market was relatively young, profit for the fiscal year ended December 2020 at 13.8 billion yen accounted for about 9% of Kirin's total earnings.

Norwegian telecommunications company Telenor previously said it booked a loss of 6.5 billion kroner ($782 million) for its Myanmar operation in the first quarter of 2021. The company in July said it would sell its Myanmar operations to Lebanese investment firm M1 Group for $105 million, after the telecommunication business environment worsened.

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