Main Q&A at the FY2024 Financial Results Briefing

A.We are focusing particularly strongly on EPS, where we have committed to achieve CAGR in the high single digits to double-digits. The former key indicator, Core Operating Profit, is susceptible to changes in the business environment for example, so we judged EPS to be the appropriate indicator for profitability because, in addition to profit growth, it also reflects the impact of capital policies and other factors. Additionally, we recognize the importance of improving not only profitability but also capital efficiency in order to increase corporate value, which is why we are also focusing on ROE and ROIC. Talking about ROIC, in the past, we monitored capital efficiency for each region. Going forward, we intend to encourage various initiatives to help achieve ROIC targets that have been set by individual regional headquarters (RHQ).

A.Our initial premise is to achieve the guidelines through Core Operating Profit growth. However, depending on how our business progresses, we may need to buy back several hundred billion Japanese yen’s worth of shares in order to achieve the guidelines by 2030. We cannot give you a specific date, but we do want to buy back the approximately 150 million shares issued through public offering when we acquired the Australian alcohol beverages company Carlton & United Breweries (CUB) in 2020 as soon as possible. We will make a decision on that based on our cash generation capabilities, Net Debt/EBITDA ratio, and discussions with stakeholders. We intend to strengthen capital investment designed to promote growth through 2027, so it might be possible to boost the scale of share buybacks from 2028 onwards once that capital investment has peaked.

A.We used a large proportion of cash to pay off debt during the period spanning 2020 to 2024 after our financial health was dented by the CUB acquisition. We were able to complete this ahead of schedule, so we formulated our financial policy based on the premise that we would continue to pursue necessary growth investments while also rewarding our shareholders.

A.The dividend payout ratio fluctuates depending on temporary gains/losses. We changed the indicator to DOE in order to achieve more stable dividends. We also committed to progressive dividends to enable us to steadily increase the dividend and encourage investors to hold our shares as medium- to long-term investments.

A.We would like to continue to target high single-digit growth, but we decided to aim for a more conservative level basically because we haven’t been able to achieve the original target. We don’t anticipate any major negative changes in the business environment through 2030. However, we do expect to experience some resistance towards alcohol over the medium- to long-term horizon as consumer preferences diversify, people become more health conscious, and young people shift away from drinking alcohol. To address these potential developments, we intend to focus not only on expanding beer-centric categories in existing markets, but also on strengthening beer adjacent categories (BAC) and further promoting our premiumization strategy. This will require us to enhance our organizational structure and also expand our area of operations.

A.WACC of roughly 5.5-6% is a best current estimate. In the long term, it is possible that risk-free rates may rise in Japan and contract outside Japan, so we will need to review this from time to time. However, even if cost of equity and WACC do rise going forward, we would not need to adjust our ROE and ROIC guidelines unless they increase exponentially, because they ensure a set spread. We are not concerned about any increase in risk premiums relating to alcohol regulations and other factors because they are not big enough to generate any quantifiable impact at this stage. We will, however, pursue various efforts as a company in accordance with the Global Strategy for Reducing the Harmful Use of Alcohol set by the World Health Organization.

A.We intend to change our RHQ structure from four RHQ to three RHQ from April 2025. Each of the three regions will become drivers of Core Operating Profit growth, establishing optimal governance systems and implementing optimal strategies for promoting individual RHQ growth. Core Operating Profit margins are expected to improve the most in Japan. Not only are we now able to implement successful price revisions, but we also expect great things from our efforts to progress as a united One Asahi unit. We expect the second best improvement in Core Operating Profit margins in Europe. In Oceania, it will take time to regain former high profit margins. Indeed, it could well take us until around 2030 to regain our record high Core Operating Profit margins on a consolidated basis.

A.We expect costs for the Group as a whole will increase by approximately JPY 30 billion in 2025. In such an environment, it wouldn’t be easy to ensure the entire benefits of earnings structure reforms contributed to Core Operating Profit. Having said that, we want to implement various earnings reforms in each region in order to help achieve Core Operating Profit growth in the mid-to-high single-digit range going forward.

A.We expect the following major returns from specific capital expenditures: (1) Enhanced production capacity: New can production lines in Europe, etc., (2) Sophisticated enterprise resource planning (ERP) and other systems: Control future risks and cost increases, generate commercial synergies, etc., (3) Ensuring safety and promoting seismic reinforcement in factories, etc.: Reduce business risks, while also improving employee well-being and enhancing human capital by retaining and recruiting exceptional talent, and (4) Sustainability measures: Initiatives designed to complement market changes, such as the development of new drinks containers.

A.This is not a conservative forecast, but rather it reflects our decision to incorporate the risk of some potential decline in demand following price revisions as well as our plans for growth investments. We are also forecasting a lower growth rate for 2025 compared to the considerably higher level achieved in 2024. However, the disclosed forecast for 2025 is an absolute minimum that must be achieved and, if the decline in sales volumes following price revisions proves smaller than expected, we will aim to achieve a higher level of Core Operating Profit than originally indicated. Regarding efforts to strengthen beer sales, our basic policy using Super Dry products to offset 2026 liquor tax revisions has not changed. In 2025, we will strengthen branding and sales promotions at mass retailers and restaurants. We are planning to expand the ratio of beer products in the beer and beer-like beverages category by strengthening our Super Dry brand as well as Asahi Draft Beer, Nama Jokki Can, and Dry Crystal products. We also plan to announce new beer products going forward.

A.Premium beverages are growing more than mainstream beverages in terms of sales composition and, in 2024, we were able to boost premium product volumes while mainstream product volumes decreased. Going forward, we will continue to promote premiumization by enhancing local champion brands (the brand with the top market share), non-alcohol beer, and global brands as we strive to achieve a level of sales growth that is even higher than volume growth. Over the medium-term, we will aim to achieve a Core Operating Profit margin of 20% or higher by 2029 or 2030 by promoting premium strategies and moving forward on reforms of earnings structures.

A.It will be difficult to increase profits in the first half but we do expect to see a recovery in the second half of 2025. In Australia, prices in high-end restaurants are rising, demand is flowing into pubs, and beer is proving to be the chosen product for affordable luxury seekers. The Asahi Group has some strong premium brands so we can demonstrate our competitive advantage in this kind of environment. We will be more likely to achieve our plan if the Australian government announces an early reduction in interest rates, but we want to try and achieve the plan without relying on such macroeconomic factors.

A.It is true that sales volumes have been on a gradual decline in the beer market. However, the Asahi Group has increased revenue by changing it price mix through price revisions and a gradual transition towards premium categories. This trend is expected to continue. In terms of beer, we are expanding our portfolio of beer and beer-like products by releasing non-alcohol beers, ginger beers, and premium beers. RTDs and non-alcohol beers are expected to grow going forward, so we intend to strengthen efforts to further promote the strong-selling Hard Rated brand and other products. In short, we intend to achieve further growth by promoting a multi beverages strategy that offers a variety of alcohol and non-alcohol products.