Suntory’s Frucor posts 31 percent drop in FY profit, halves dividend as costs rise

Frucor Beverages, whose parent Suntory Beverage & Food debuted on the Tokyo Stock Exchange last week, posted a 31 percent decline in annual profit as costs rose and sales fell.

The New Zealand bottler of Gatorade, V, Just Juice, h2go and Pepsi soft drinks reported a profit of $22.6 million in calendar 2012, down from $32.8 million a year earlier. Sales declined 2.3 percent to $405.8 million.

Frucor declined to comment on its results, posted with the Companies Office, which show it paid dividends of $10.9 million last year, down from $25.4 million in 2011. The value of its brands was unchanged at $13.2 million.

While cost of sales actually fell 8.9 percent, resulting in an increase in gross profit, its selling and distribution expenses jumped 20 percent to $97 million and financial expenses were $4.6 million, up from just $4,000 in 2011. Tax paid declined 28 percent to $9.4 million.

Frucor made royalty payments for the use of brands of $50.9 million in 2012, down from about $55 million in the previous year. It had $13.5 million of contracted capital expenditure, related to construction of a new bottling line, from $2.2 million a year earlier.

The company is currently in dispute with the Inland Revenue Department over the treatment of its optional convertible notes and as at the time of its annual report being published was still awaiting allocation of a High Court hearing after the drinks maker filed papers in the High Court last year.

The tax department disputes some $12.4 million of deductions claimed on interest on the notes between 2006 and 2009. In addition IRD has imposed a ‘use of money interest’ charge of about $5.9 million and shortfall penalties of $3.7 million, notes to the accounts show.

Last year it made a second, alternative assessment of non-resident withholding tax amounting to $8.3 million plus interest of $4.1 million and penalties of $4.2 million on Frucor. In making the second assessment, the tax department accepted both the income tax and NRWT assessment couldn’t both stand, Frucor says.

The Auckland-based maker of Just Juice and V energy drink filed a statement of claim and notice of assessments challenging the tax department’s position in January, according to notes in its 2011 financial statements lodged with the Companies Office. The potential bill is flagged as a contingent liability.

Suntory Holdings acquired Frucor in 2009 from France’s Danone and the local business is now held within Suntory Beverage & Food, which went public last week after the parent sold down its holding in an initial public offering that raised almost US$4 billion.

It plans to use some of the proceeds to chase acquisitions outside of Japan. Japan accounted for 69 percent of sales and 55 percent of earnings in fiscal 2012. Oceania made up 3 percent and 5 percent respectively last year.

Suntory Beverage’s shares last traded at 3,255 yen, up about 5 percent from their IPO price of 3,100 yen.

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