Asahi's Better Drinks Co takes $3.7M impairment against brands, narrows full-year loss
By Jonathan Underhill
July 10 (BusinessDesk) - Better Drinks Co, the New Zealand drinks company owned by Japanese brewer Asahi Group, has taken a charge against the value of its brands, the second year in a row it has recognised an impairment on its balance sheet.
The Auckland-based company's 2016 accounts record an impairment of $3.7 million against its brands, writing them down to $20.3 million. That follows a $42.3 million impairment in 2015 to write off all of its goodwill. That resulted in a net loss of about $4.2 million, narrower than calendar 2015's loss of $43 million.
Better Drinks includes the Charlie's range of juices and fruit drinks, acquired during an acquisition spree in 2011. Asahi took Charlie's Group private in 2011 when it paid 44 cents a share for the company, a 57 percent premium at the time, that valued the listed juice maker at $129 million. Its suite of drink brands also includes Phoenix, Juicy Lucy Ti Tonics, Real Iced Tea and Stash Tea. Its New Zealand marketing executive didn't immediately return calls.
Revenue declined to $29 million last year from $31 million in 2015. Sales were $43 million in 2012, the first year of Asahi ownership. Gross profit actually rose to $13 million from $12.8 million and both selling and marketing costs were lower in the latest year.
While buying Charlie's in 2011, Asahi also agreed to buy Independent Liquor Group for $1.5 billion from shareholders including buyout firms Pacific Equity Partners, Unitas Capital and the widow of company founder Michael Erceg. It ended up getting a $209 million settlement after suing the vendors of Independent, claiming its performance had been inflated.
However, Independent, which owns alcohol brands such as Woodstock Bourbon and Boundary Road beer, returned to a profit of $15.4 million in 2016 after slashing costs faster than revenue fell. Asahi wrote off its remaining goodwill in Independent in 2014, when it took impairment charges totalling $255 million.
Better Drinks' accounts don't give details of which brands were impaired in the latest year. The company estimated the value of the brands using the relief from royalty method. The net present value of the royalties was estimated using a discount rate of 9.85 percent.
At year end its outstanding trade receivables due from related parties amounted to $1.67 million while trade payables due to related parties, mainly a loan and interest to the parent, amounted to about $48 million from $49 million a year earlier. The notes say parent Asahi Holdings (Australia) won't seek repayment of the loan in the foreseeable future.
In March, Asahi completed the 7.3 billion euro purchase of five eastern European beer brands from Anheuser-Busch InBev while last month Japan's biggest beer maker sold its remaining 20.4 percent stake in China's Tingyi-Asahi Beverages for about US$614 million.