Japan: Kirin Breweries Co. Ltd. shares dropped 3.5% after 1H profit forecast failed to meet optimistic market estimate

Shares of Kirin Breweries Co. Ltd. dropped 3.5 percent after Japan's second-largest beer maker's upgraded half-year profit forecast fell short of analysts' expectations, Reuters communicated July 11.

The company said the consolidated forecasts have been revised principally due to the effect of revisions at the non-consolidated level.

Key factors leading to revision of non-consolidated forecast included higher than forecast sales volumes of happo-shu, new genre and other products in the domestic alcohol business; an increase in dividends received due to a special dividend declared by Lion Nathan, an alcohol beverage subsidiary in Australia.

As a result, forecast non-consolidated ordinary income for the interim period is ¥37.0 billion and forecast non-consolidated net income is ¥25.0 billion, respectively 32.1% and 47.1% higher than previous forecast.

Consolidated and non-consolidated forecasts for the full year will be presented at the interim results announcement scheduled for August 10, 2006.

As Reuters released July 10, Kirin Brewery Co. raised its half-year profit forecast by 7.5 percent on healthy sales of low-malt and no-malt beer-like drink products, but the new estimate was still below market expectations.

Japan's second-biggest beer maker said it was expecting a group operating profit of 43 billion yen (US$377.8 million) in January-June, up from a previous forecast of 40 billion yen and the 37.5 billion yen it recorded in the first half last year.

But the new forecast missed a consensus projection of 47.3 billion yen in a poll of six analysts by Reuters Estimates.

Kirin's share in the overall beer market has been inching up with the popularity of its low-malt "happoshu" and no-malt beer-like drink products, while bigger rival Asahi Breweries Ltd. is struggling to keep up its share due to its weakness in the growing beer-like drink market.

Under the country's current alcohol-tax system, happoshu and beer-like drinks -- which are made from such ingredients as hops, bean protein and caramel -- escape high taxation because their ingredients mean they are not classified as beer.

The company's revision followed a report by the Nihon Keizai business daily last Friday that said Kirin would post a 17 percent rise in half-year operating profit to 44 billion yen.

Kirin revised up its half-year net profit forecast by 6.7 percent to 16 billion yen thanks to a special dividend payment from Australian subsidiary Lion Nathan Ltd. (LNN.AX: Quote, Profile, Research), while it raised its sales outlook by 1.7 percent to 784 billion yen for the January-June period.

Kirin added it would announce its full-year earnings forecast on Aug. 10, when it will release half-year results. A company spokesman declined to say if it would revise a previous outlook issued in May. For the year to December, the company had forecast a group operating profit of 117 billion yen, below market expectations of 125 billion yen in a poll of 12 analysts by Reuters Estimates.

Separately, Kirin said it would make soft drink arm Kirin Beverage Corp. a wholly owned unit on Oct. 1 for a total of almost 75 billion yen.

Through a tender offer, it had acquired a 97 percent stake in Kirin Beverage, and the subsidiary will be delisted on Aug. 11. Parent Kirin will swap the remaining Kirin Beverage shares for 3,350 yen each.

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