Coca-Cola Amatil improves outlook of Australian drinks

SYDNEY: Coca-Cola Amatil is seeing signs of improvement in its key Australian soft drinks and water business while strong full-year contributions from its offshore markets helped the bottler’s shares gain ground.
Net profit for the firm jumped 81 per cent to $445.2 million (K1.11 billion) for the year to Dec 31, fuelled by one-off gains, while total revenue of $4.9 billion (K12.31 billion) was down 2.8 per cent on the previous year.
The group’s major Australian beverages division had a challenging year with underlying earnings before interest and tax (EBIT) down 6.4 per cent to A$412.6 million (K1.03 billion).
Coca-Cola Amatil managing director Alison Watkins said despite the overall weak performance from Australian beverages, there was an improvement in revenue, volume and earnings in the second half as investments in lower prices slowed declining sales.
Chief financial officer Martyn Roberts said the group had increased their share of Australia’s water drinks market but the sparkling segment, which covers soft drinks and the core Coca-Cola brand, had little growth in market share.
“The most pleasing number is the positive volume growth in still beverages and that largely came from a return in (sales) volumes in water which we invested in price after Easter,” he told investors on Wednesday.
“That was a big change for us in terms of market share.”
The group’s other markets – NZ, Fiji, Indonesian, Papua New Guinea and its alcohol and coffee divisions – all reported higher EBIT (earnings before interest and taxes), including a 30.6 per cent jump in Indonesia and PNG to A$90.9 million (K228.53 million).
A A$29 million (K72.91 million) boost to the bottom line from the sale and leaseback of CCA’s Richlands plant in Queensland fuelled the 81 per cent net profit bounce.
Coca-Cola said underlying net profit of A$416.2 million (K1.04 billion) was broadly in line with guidance.
Watkins said the A$40 million (K100.56 million) investment in lower prices in the Australian business, announced last November, would weigh on earnings in the short-term and also flagged an impact from the recently introduced NSW container deposit scheme.
The scheme allows consumers to return cans and bottles for a 10 cent (25toea) refund but added to drinks manufacturers’ costs.
“What we saw was quite significant and disappointing delays to the roll out of collection points in NSW which meant that consumers were not able to easily redeem from Dec 1 if they wanted to redeem from a collection point,” Watkins said.
Watkins said CC-Amatil continued to target mid-single digit earnings per share growth and while net debt increased by A$344.4 million (K865.87 million) to A$1.3 billion (K3.26 billion), she said the balance sheet remained strong.
Citi analyst Craig Woolford said the FY17 result had met expectations and the outlook was positive, with improving Australian sales, better margins in Indonesia and growth in New Zealand business.
Coca-Cola Amatil shares gained 14 cents (35toea), or 1.6 per cent, to A$8.83 (K22.20) on Wednesday, their highest level since mid-July. – SBS