The Better Drinks Co, which includes New Zealand assets bought by Japanese brewer Asahi Group during an acquisition spree in 2011, has taken a $42.3 million impairment to write off all of its goodwill, resulting in an annual loss.
Better Drinks includes Charlie's Group, which Asahi acquired in 2011 for 44 cents a share, valuing the listed juice maker at $129 million. The price amounted to a 57 per cent premium to Charlie's stock before the deal was announced that year.
The New Zealand company, whose brands include Charlie's, Phoenix, Juicy Lucy Ti Tonics, Real Iced Tea and Stash Tea, recorded sales of $31.3 million in calendar 2015, down 0.5 per cent from 2014, its financial statements show. Gross profit fell 11 per cent to $12.8 million but its operating result included the goodwill write-off, resulting in a net loss of $43 million from a 2014 profit of $134,000.
Notes to the accounts say the impairment test include assumptions about earnings growth, synergy and cost-saving initiatives and represented "management's assessment of future trends in the industry".
The fair value of goodwill was determined on a 'fair value less costs of disposal basis' which showed the carrying amount of the group exceeded its recoverable amount.
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.
In a busy year for acquisitions, it also gained regulatory approval to buy the juice and mineral water business of Australia's P&N Beverages for about US$200 million and agreed to acquire Malaysia's PepsiCo bottler Permanis Sdn for US$274 million.
Within months of acquiring Independent Liquor, Asahi has filed papers in the Federal Court of Australia in Melbourne over the $1.5 billion price tag, claiming Independent Liquor's earnings before interest, tax, depreciation and amortisation were "significantly" inflated during the due diligence and sale process, and that they were provided with "false and misleading financial information" during that time. It received a $209 million settlement, although that was more than offset by $255 million of impairment charges.
Independent achieved a profit of $200,000 in calendar 2015 as sales rose 3.8 per cent to $393 million, according to its accounts released last week. That followed losses of $52.6 million in 2014, $41.6 million in 2013 and $117.9 million in 2012.
"In spite of the impairment loss, TBDC remains in good shape to meet the current and future challenges of the New Zealand beverage market," an Asahi Beverages spokeswoman said. "TBDC has the full support of its parent company, Asahi Holdings (Australia) Pty Ltd."