Kirin’s 2011 purchase of Schincariol, Brazil’s second-largest beer group, has come under fresh scrutiny after the Japanese brewer warned of its first-ever annual loss due to the deterioration of its business in Brazil.
The company on Monday projected an annual loss of Y56bn ($462m), reversing an earlier forecast for a profit of Y58bn, its first red ink since the company listed its shares in 1949.
The Japanese brewer blamed a sharp fall in the Brazilian real and weak economic conditions in the country. Economists surveyed by Brazil’s central bank expect gross domestic product to contract 3.6 per cent this year and 2.7 per cent in 2016.
Kirin has also faced fierce competition with Ambev, Anheuser-Busch InBev’s Latin American arm, in South America’s biggest beer market.
In the first nine months of the year, the Japanese brewer’s sales in Brazil fell 23 per cent and its operating loss expanded to Y5.4bn from a loss of Y600m during the same period a year earlier.
Kirin, Japan’s second-largest brewer, was one of the country’s most aggressive buyers of foreign assets between 2006 and 2011, seeking alternatives to an ageing and shrinking home market.
It carried out more than 20 deals during that period, including the purchase of Australian beer group Lion Nathan and National Foods — subsequently merged into Lion — and a 48 per cent stake in San Miguel Brewery in the Philippines.
Most recently, it agreed to buy Fraser and Neave’s 55 per cent stake in Myanmar Brewery for $560m in August.
However, Kirin has taken a break from big acquisitions as it struggles to turn around its business in Brazil. Sceptics had long questioned whether Kirin would be able to recover the costs of spending $3.9bn to acquire Schincariol. The deal was contentious, with Kirin forced into a battle for control by dissident members of the Schincariol family who had sought a court injunction against the acquisition.
On Monday, Kirin said it would continue to try to strengthen the brand and make its distribution channels more efficient, and did not rule out slimming down its workforce in Brazil. Kirin said it had no plans to sell the business.
Shares in Kirin closed up 3.1 per cent in Tokyo, after falling nearly 4 per cent earlier in the day after media reports of the potential loss.