Asahi Group Holdings Ltd. lowered its annual sales and profit forecast again as its $22 billion push into overseas markets makes Japan’s largest brewer more vulnerable to currency swings.
Consumption in the domestic market has also weakened.
Operating profit will probably be ¥202 billion ($1.9 billion) for 2019, the Tokyo-based company said Tuesday, citing currency fluctuations and domestic headwinds. That compares with its prior forecast of ¥215.5 billion, and the average analyst estimate of ¥215.9 billion.
Asahi shares fell as much as 5.6 percent in early trading in Tokyo on Tuesday, the biggest intraday decline since July. The stock had climbed about 29 percent this year before the latest change in outlook.
Asahi also lowered its sales forecast to ¥2.09 trillion, compared with the average estimate for ¥2.12 trillion. Its annual planned dividend was cut to ¥100 per share from the prior ¥106 per share. The company had previously lowered its forecasts in August.
The maker of Super Dry beer is under pressure from both its string of overseas acquisitions in the last four years and intense domestic competition for a shrinking number of drinkers. Asahi’s expansion abroad has made it more vulnerable to swings in foreign exchange rates.
Despite the overseas drop caused by currency fluctuations, the segment is still expected to be a profit driver in the future, according to Tomonobu Tsunoyama, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. More concerning was the domestic market, where the company’s inability to boost earnings and lack of sales uptick before an October sales tax hike was a concern.
The earnings implication was “negative,” Tsunoyama wrote in a note to clients. “Management has not been able to put the brakes on the slide in earnings in the domestic alcohol and soft drinks operations.”
Chief Executive Officer Akiyoshi Koji has been ramping up the brewer’s overseas business through deals, most recently spending around $11 billion to purchase Australia’s largest brewer from Anheuser-Busch InBev in July. Overseas sales made up about 33 percent of revenue in the last fiscal year, most of that from Europe.
Growth in global beer consumption is flat-lining as younger drinkers are choosing local craft brews and lower-calorie drinks, or even opting for cannabis-infused beverages for relaxation with no hangovers. Euromonitor predicts that beer consumption volume will grow only around 1.4 percent annually on average over the next five years.
Although his peers are trying to diversify out of beer into businesses such as cannabis or cosmetics, Koji has said that his aim is to grow Super Dry into a global brand, and build up the brewer’s worldwide presence to four or five hubs from its current three of Japan, Europe and Australia.