Coca-Cola Amatil released its full year results for 2016. The soft drinks global giant had an underlying EBIT growth of 3.5 per cent, underlying EPS growth of 6.2 per cent and strong cash flows that brought net debt to below $1 billion.
The group e Alison Watkins of Coca-Cola Amatil said the underlying results delivered on the shareholder value proposition, achieving mid-single digit EPS growth, payout ratio above 80 per cent and maintaining a strong balance sheet and return on capital employed.
“We have again seen the strength of the diversity of Amatil’s markets, products and categories, and how these can work together to generate strong cash flow and steady growth,” said Watkins. “This is a solid group result for 2016, and reflects our continued progress in delivering the outcomes of the 2014 strategic review.”
She said strong performances were seen in Australia, New Zealand, Indonesia, Papua New Guinea, and Fiji.
“Australian beverages performance was adversely impacted by continuing competitive pressure in the water category, ongoing pressure on the cola category and the continued shrinking of operational accounts, with EBIT declining 1.8 per cent,” Watkins commented.
New Zealand and Indonesia showed strong performances in Sparkling and Still Beverages. In New Zealand, Sparkling benefited partnering with Restaurant Brands. Alcohol & Coffee momentum continued delivering double-digit revenue, volume and EBIT growth for a second consecutive year with a strong performance in all key categories.
Watkins also announced Coca-Cola Amatil’s plans to close their South Australian (SA) factories in 2019. The closure of Thebarton facility in the region will deliver a further $20 million in cost savings from 2020 beyond the additional $100 million in cost savings to be delivered by the Australian Beverages over the next three years.
“We have now identified additional consolidation opportunities across the Australian supply chain and will close our South Australian manufacturing facilities in 2019. This is not a decision that we take lightly, however we know we must modernise and invest in new capability,” said Watkins.
Last October 2016, the company announced its $75 million investment in Brisbane with a new warehouse facility at their existing Richlands plant. She said it will be “a new; expanded and automated facility; generating greater capacity, comparatively lower operating costs and reduced materials handling and truck movements.”
It will generate more capacity as they develop Richlands, a $90 million investment helping it to install a new glass production line and new dairy and juice production capacity.
“This investment will optimise our national logistics network and modernise our supply chain with greater use of technology and automation across a wider range of products,” said White.
There is also expected to be approximately $50 million of one-off costs associated with this program expected to be offset by surplus profit from the proposed sale and leaseback of the Richlands site and sale of the Thebarton site following its closure. Other manufacturing activities will shift to Kewdale in WA, Moorabbin in Victoria and Northmead in NSW.
Coca-Cola Amatil will maintain between 200 and 250 jobs in SA in other areas, like sales and the suburban Salisbury distribution centre.
“I know today’s announcement will be difficult for the team, many of whom have been part of Coca-Cola Amatil for many years. They are our priority as we work through this transition,” said Watkins.
According to her, the company will provide financial counselling, personal support and assistance in finding new positions.
“Where feasible, some permanent staff will be redeployed to other positions within the company. Coca-Cola Amatil will maintain a strong workforce and presence in South Australia after 2019. Existing sales, distribution, warehousing, equipment servicing and Statewide Recycling teams in the state are unaffected by the changes,” she further added.
Gino Gaddy, who has worked at the Thebarton plant for 15 years said he was unsure what he would do next and was in shocked with the announcement.
“Our first thoughts are with the workers and importantly their families. Many people have worked for many, many years at Coca-Cola,” he told FiveAA radio.
SA manufacturing minister Kyam Maher said the move was “exceptionally disappointing”. He said no discussions with the company were made prior to the recent announcement. While opposition leader Bill Shorten said manufacturing jobs must be safeguarded.
“Very sad day for workers at Coca-Cola factories in SA. Australia must stand up for manufacturing jobs,” Shorten posted on Twitter.
Watkins said SPC continued to progress its program to modernise the business, however continued pressure in core traditional categories resulted in a modest loss for the business.
Coca-Cola Amatil full year profit dropped by 37.4 per cent drop with a $171.8 million writedown on its SPC fruit canning business dragging on results.
“The SPC team has worked hard to deliver on its investment plan objectives and has made significant progress in modernising the manufacturing capabilities to enable us to shift into more profitable snacking products,” Watkins said.
“Unfortunately, market conditions, including tougher competition from cheaper imports, has put pressure on the businesses’ profitability in the short term. The need to impair SPC’s carrying value was carefully considered and we believe it is prudent given these headwinds.”
The joint investment program with the Victorian Government is expected to be completed this year. Watkins said the company sees a strong future for SPC nonetheless and remains committed to securing its long-term future. She also said the 2014 Group Strategy continues to set the direction for the Coca-Cola Amatil Group.
“We’ve stuck to our plans and these results are further confirmation that we are delivering a strong and sustainable business for today and tomorrow,” said Watkins.