The Japanese brewery runs a health science business consisting of Blackmores acquired last year, functional ingredients arm Kyowa Hakko Bio, and newly acquired FANCL.
The business reported an operating loss during Q3 last year, but the losses have narrowed this year due to strong sales coming from Blackmores.
In its latest financial results, the company said that normalised operating profit from its health science business climbed 4.8 per cent, turning from a loss of JPY$6.8 bn to JPY$2bn in Q3 this year.
Revenue from the health science business also increased 51.9 per cent from JPY$69.2 bn (US$449.89m) to JPY$105.1 bn (US$683.28m)
“Loss in the [Health Science Business] segment narrowed due to profit contribution from Blackmores,” said the company.
Blackmores, which was acquired by Kirin last August, saw its revenue jumped 218.5 per cent from JPY$16 bn (US$104.02m) to JPY$50.9 bn (US$330.91m).
Normalised operating profit from Blackmores also went up from JPY$0.6bn (US$3.9m) to JPY$4.4 bn (US$28.6m) – up 677.9 per cent.
Health science ingredients arm Kyowa Hakko Bio saw revenue slightly down by 0.6 per cent from JPY$38.1bn (US$247.70m) to JPY$37.9bn (US$246.49m).
Normalised operating profit from Kyowa Hakko Bio went up from a loss of JPY$5.1bn (US$33.16m) to a loss of 4.3bn (US$27.96m).
It should be noted that the results this time round only included sales and profit performance from Blackmores and Kyowa Hakko Bio.
Performance of FANCL will only be reported from Q4 this year as the company was only acquired in the midst of Q3 during September.
Prior to Blackmores’ acquisition, Kirin’s health science business consisted of functional beverages and supplements, as well as Kyowa Hakko Bio, which has been suffering from factors such as lower-than-expected amino acids sales.
Blackmores sees strong growth in Australia
Blackmores reported good performance in Australia and New Zealand, with its revenue in Q3 up 4.6 per cent from AUD$217m (US$142.62m) to AUD$227m (US$149.19m).
This was led by strong growth in the practitioner-only brand BioCeuticals and increase in price from April.
Revenue from China went up 11.6 per cent from AUD$137m (US$90m) to AUD$153m (US$100.56m).
However, the company said that its growth in China has been affected by economic changes, as well as termination of contracts with some Australia export distributors temporarily impacting sales results in Q3.
In South East Asia, revenue was down 8.2 per cent from AUD$132m (US$86.75m) to AUD$121m (US$79.52m).
“Blackmores is progressing as expected in Australia and Southeast Asia. However, sales growth in China is slower due to a deteriorating market environment. Nonetheless, we expect to achieve the total Normalised OP (Operating Profit) in this segment forecasted in Q2,” said Hiroaki Takaoka, senior executive officer and general manager of the Corporate Strategy Department.
Continue to drive profitability via health science
Kirin said it would continue to drive profitability through its health science products, especially since Japan’s non-alcoholic beverage market continued to face intense competition.
One of the challenges faced by its non-alcoholic beverage business, is the continued commoditisation of the green tea market.
Overall, Kirin’s Q3 total revenue was JPY$1699.7bn (US$11bn), up 9.8 per cent.
Profit attributed to owners of the company was down 5.5 per cent from JPY$83.9 bn (US$542.17m) to JPY$79.3 bn (US$512.44m).
Takaoka added that a presentation session would be held on December 18th to discuss growth strategy for the Health Science Business.
Impact of red yeast rice on FANCL greater than anticipated
The performance of FANCL, which was acquired in September, will be incorporated from October.
The company said that FANCL’s sales have suffered from Kobayashi Pharmaceutical’s red yeast rice saga which has in fact, affected the entire health supplements sector in Japan.
“Sales from April to September decreased by -4 per cent YoY, and operating income decreased by approximately -20 per cent because of FANCL’s performance being affected by the red yeast rice issue than initially anticipated and the decision to not chase temporary sales increase through short-term promotions,” said Takaoka.
