Po-faced Asahi booked accumulated losses of over AUD one billion
Asahi has massively overpaid for its Australian acquisitions. This is what observers say and what is underlined by its accounts. In September 2017 the Australian Financial Review (AFR) ran a piece, which argued that Asahi has racked up losses of AUD 1.13 billion (USD 877 million) in Australia during six years after slashing the value of goodwill by AUD 1.19 billion. This must be seen as an unofficial admission that it paid too much for drinks companies Schweppes and Independent Liquor in addition to massively overvaluing the brands it took on.
Asahi is Australia's second-largest non-alcoholic beverages bottler after Coca-Cola Amatil. It owns or bottles brands like Asahi Super Dry, the craft beer brand Mountain Goat, the alcopop Vodka Cruiser and Somersby cider.
As was pointed, between 2011 and 2016 the group has booked accumulated losses of AUD 1.13 billion, including losses of AUD 122.8 million in the twelve months ended December 2016, on revenues of AUD 1.57 billion (USD 1.2 billion).
In many years the company made a small operating profit but sank into the red after slashing the value of goodwill and brands.
Because of the losses, the AFR said Asahi paid no tax most years and received a net AUD 40 million in tax benefits during six years.
Asahi entered the Australian beverages market in 2009 when it outbid Coca-Cola Amatil and fellow Japanese drinks company Suntory for assets that included soft drink bottler Schweppes, which makes Pepsi. In 2011 it acquired Independent Liquor, maker of beer, cider and RTDs,
Over the years it paid AUD 1.18 billion, or 15.2 times historic earnings, for Schweppes, AUD 1.2 billion for Independent Liquor, AUD 188 million for private label bottler P&N Beverages, AUD 100 million for Charlies Group and AUD 54 million for water bottler Mountain H2O in 2012.
In September 2015, it scooped up the Melbourne craft brewer Mountain Goat for reportedly AUD 42 million (or 14 times EBIT) after buying the Cricketers Arms brand for AUD 700,000 in April 2013.
Industry sources said Asahi has been had over a barrel. This eventually dawned on the company so that, in 2014, it sued private equity firms Pacific Equity Partners and Unitas Capital, the previous owners of Independent Liquor, for about AUD 700 million, alleging they misrepresented Independent Liquor’s financial position by inflating earnings during the sale process.
PEP, Unitas Capital and their insurers agreed to pay AUD 200 million to settle the case and Asahi booked an AUD 189 million one-off gain in its 2014 accounts.
Asahi is not the only Japanese beverage company to have shredded billions of dollars of value in Australia. Japanese brewer Kirin is estimated to have written off about AUD 2 billion (USD 1.55 billion) off the AUD 2.8 billion it paid for dairy and fruit juice manufacturer National Foods in 2007 and the AUD 910 million it outlaid for the cooperative Dairy Farmers, one of the country’s largest dairy processors, in 2008.
However, Suntory, which paid AUD 1.2 billion, or 13.3 times earnings, for Frucor Beverages has fared better, with Frucor’s Australian and New Zealand operations earning NZD 25 million last year on sales of NZD 418 million, underpinned by demand for the energy drink V.
In view of its meagre returns, last year Asahi unveiled plans to close three of its nine local bottling plants, including MacGregor in Queensland, Moorebank in NSW and Payneham in South Australia, with the loss of 140 jobs.
But recently, Asahi said it would invest more than AUD 40 million to upgrade its Laverton plant near Melbourne. The upgrade will enable the site to manufacture the international premium beers Peroni Nastro Azzurro and Asahi Super Dry. As a result the site will increase beer production from 170,000 hl to over 400,000 hl per year.
In order to accommodate the increase in beer, production of some RTD and soft drink volume will be shifted to other plants.
The target date for commencement of commercial production of Peroni Nastro Azzurro in kegs is November 2018 whilst the target for Asahi Super Dry in glass bottles will be January 2019.
