Outgoing Coca-Cola Amatil boss defends taxpayers' SPC Ardmona subsidy

Eli Greenblat
February 19, 2014
The Age
Outgoing Coca-Cola Amatil boss Terry Davis has handed the next chief of the beverage and food group a clean slate from which to fashion strategy and growth plans, writing off $404 million against its loss-making SPC Ardmona fruit business that leaves goodwill at zero.
Mr Davis, who leaves CC Amatil in March after 12 years in the job, defended the grab for $22 million in taxpayer funds in the form of a Victorian state government rescue package to save the SPC cannery from possible closure, with CC Amatil to also invest $78 million to revive the loss-making venture.
”Hopefully we’ve turned the tide with SPC by getting Australian consumers to understand that if we all don’t support Australian-grown produce then we won’t have farmers, we won’t have fruit and vegetable growers in this country,” Mr Davis said.
He defended the size of the government investment as CC Amatil reported underlying profit of $502.8 million for the 2013 calendar year, down 9.6 per cent, as revenue fell 1.2 per cent to $5.036 billion.
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”It’s really simple, if SPC closed down or moved its operations overseas the decimation of the Goulburn Valley and the resulting number of people in unemployment … was just enormous and the [state] government did the math and said ‘This is actually a good use of taxpayer funds.’ ”
He said a larger investment from CC Amatil ”didn’t stack up” and while he was a supporter of the free market, SPC did not compete on a level playing field and needed the government help.
Mr Davis said he was determined to book the SPC write-down on his watch given it was his decision to buy in the first place, in 2005, for $700 million.
”I think there has been such a habit in Australia as a new CEO comes in, and saying, ‘Oh this is all not good,’ and writing it all down,” Mr Davis said as he unveiled CC Amatil’s full-year net profit had dived 82.5 per cent to $79.9 million, its poorest result in two decades driven by the non-cash write-down on the SPC business.
Mr Davis will step down next month to make way for new chief executive, former Graincorp boss Alison Watkins.
”So, my view is, the acquisition was made on my watch,” Mr Davis said, ”and it was appropriate that the write-down also occurred on my watch and it gives her [Ms Watkins] a clean slate to go and do what she needs to do.”
That clean slate could include a restructure of the sprawling CC Amatil business, which covers a large portfolio of brands in categories such as soft drinks, beer, alcoholic cider, spirits, water, coffee, juice and fruit.
CC Amatil’s Australian beverage business, led by its flagship Coca-Cola soft drink brand, suffered from intense price competition especially in the grocery channel which resulted in a 9.3 per cent decline in Australian beverage earnings overall.
While its businesses in Indonesia and PNG saw volumes rise by 6.8 per cent, it recorded an Australian dollar decline in earnings before interest and tax of 13.2 per cent. Indonesia volumes grew by more than 10 per cent with a small rise in local currency EBIT of 5 per cent.
CC Amatil declared a final dividend of 32¢ a share, taking total dividends for the year to 58.5¢.
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