Coca-Cola Amatil sees profit plummet in wake of SPC write-down

Alison Watkins, Coca Cola AmatilCoca-Cola Amatil has reported that full-year net profit after tax slumped 37.3 per cent to $279 million in 2018, in the wake of its $147 million write-down of fruit and veg cannery SPC.

CCA group managing director Alison Watkins said 2018 was a transition year for the company, with the Accelerated Australian Growth Plan, including the introduction of container deposit schemes, economic factors in Indonesia and operational challenges in PNG all impacting the bottler’s full year profit.

The company delivered underlying earnings before interest and tax (EBIT) from continuing operations of $634.5 million, but net profit from continuing operations fell 6.5 per cent to $388.5 million.

“We saw a strong year for the New Zealand, Fiji and Alcohol & Coffee businesses, while there are also positive signs for Australian Beverages with volume growth in Coca-Cola Trademark beverages in the second half,” Watkins said.

“Despite the segment result there are also encouraging signs in Indonesia with volume growth over the last nine months of the year. However, as previously reported the Indonesian result was affected by soft market conditions, a weak currency and higher commodity prices. The business is strongly leveraged to capture future growth.”

CCA reported Australian Beverage’s volume share lifted for the year, in both sparkling and still beverages. Coca-Cola Trademark saw a volume growth during the second partially due to the continued success of Coca-Cola No Sugar. Low- and no-sugar cola achieved low-single digit volume growth for the year, accelerating in the second half. There was also strong volume growth in dairy and energy.

Alcohol achieved volume growth, high single-digit revenue growth and another year of double digit EBIT growth for the year. Spirits and premix grew ahead of market, Paradise Beverages continued to grow sales and Coffee also lifted revenue and volume with positive drivers including coffee bean products and sales in grocery. EBIT performance reflected investment in international opportunities including in Indonesia as SoCo Coffee Roasters was also launched during the year.

2019 another year of transition

Looking to the year ahead, Watkins said 2019 is going to be the second of a two-year transition phase for the company. Australian Beverages will be positioned for growth in 2020, as CCA’s additional $10 million of investment in the Accelerated Australian Growth Plan is completed.

“We are encouraged by the volume growth in Indonesia from April 2018 and will continue to deliver our Accelerate to Transform strategy with additional direct marketing expenditure to be invested in 2019. However, current macroeconomic conditions, a weak Indonesian rupiah, higher commodity costs and current consumer spending trends are expected to continue. Our New Zealand & Fiji, Papua New Guinea and Alcohol & Coffee businesses are expected to again deliver growth in line with our Shareholder Value Proposition,” said Watkins.

“The Amatil Group is targeting a return to mid-single digit EPS growth from 2020, in line with our shareholder value proposition. Our level of performance depends on the success of revenue initiatives in Australia, Indonesian economic factors and regulatory conditions in each of our markets.”

CCA commits to 10 per cent reduction in sugar content 

Coca-Cola also reported that Coca-Cola No Sugar and the consumer trend towards low- and no-sugar choices have lifted the Australian Beverage earnings. Watkins said Coca-Cola No Sugar volume sales led overall Coca-Cola Trademark volumes into positive territory for the half.

“That’s a testament to Coca-Cola No Sugar’s flavour – taste tests showed it’s actually preferred by a majority of Classic Coke drinkers and at least equally liked by lovers of Coke Zero. It’s also a testament to the trend toward low- and no-sugar choices. We’ve heard the message on consumer well being, and we’re delivering with low- and no-sugar options for all our major beverage brands,” said Watkins.

CCA’s in-store execution and market campaigns will be improved by the $10 million investment in the state immediate consumption channel. The soft drinks maker has committed to a 10 per cent reduction in sugar content (grams/100ml) in its Australia and New Zealand portfolio by 2020, and a net 20 per cent reduction in Australia by 2025.

“We have achieved strong progress against this target with a net 5.7 per cent reduction of grams of sugar per 100ml across our portfolio of sales against the 2015 baseline. We also saw good results from products like Coca-Cola Raspberry, and the launch of Coca-Cola Orange No Sugar and Coca-Cola Vanilla No Sugar. And we’re leading the way in New Zealand with the world-first launch of Coca-Cola Stevia No Sugar. So this was an encouraging year for Coca-Cola Trademark beverages. We look forward to continued momentum in 2019,” concluded Watkins.

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