Coca-Cola Amatil books big profit slide as Australian and Indonesian earnings add to SPC woes

ELI GREENBLAT
FEBRUARY 21, 2019
SENIOR BUSINESS REPORTER

Coca-Cola Amatil has posted a 37.3 per cent slump in full-year net profit as its bottom line was dragged lower by almost $150 million in impairments taken to its soon-to-be sold SPC cannery business, a continued slide in earnings from its flagship Australian soft drinks arm and worsening trading from its Indonesian drinks operations.
Once the powerhouse of growth for the beverages company, both Australia and Indonesia recorded falls in earnings of 8.8 per cent and 6.4 per cent respectively while its New Zealand and Fiji operations provided the only substantive earnings kick with pre-tax earnings across the tow regions up 7.3 per cent.
Despite promises years ago from Coca-Cola Amatil (CCL) chief executive Alison Watkins that she would return the beverages group to mid-single digit earnings-per-share growth in the medium term, that has failed to eventuate and the earnings slide — driven by changing consumer tastes, poor weather, a downturn in the Indonesian economy — is making that pledge increasingly difficult to deliver.
This morning Coca-Cola Amatil said full-year net profit to December 31 fell to $279m from $445.2m in 2017, as revenue was flat at $4.752 billion from $4.7bn the year before.
This week Coca-Cola Amatil announced it would write off nearly $150m in value from its struggling SPC after having bought SPC for $700m in 2005 under then chief executive Terry Davis as part of a plan to widen the beverage company’s business operations.
SPC has now been classed a “discontinued operation”, and Coca-Cola Amatil’s full-year profit from continuing operations fell to $401.5m from $444.5m. Underlying EBIT from continuing operations fell 6.5 per cent to $634.5m.
The final dividend was kept flat at 26 cents per share, 50 per cent franked, and payable on April 10. It takes the total dividend for the year to 47 cents, also flat with the payout in 2017.
Across its operations, spanning Australia, New Zealand, Fiji and Indonesia, the pacific nations of New Zealand and Fiji were the only segments to report earnings growth, with Coca-Cola Amatil’s overall performance continuing to be dragged down by its struggling Australian beverages arm which is beset with intense competition and customers turning away from sugary fizzy soft drinks.
Coca-Cola Amatil said its Australian beverages arm increased share for the year, both in sparkling and still beverages, however earnings for the division still fell, with EBIT down 8.8 per cent to $376.1m as sales were down 0.7 per cent to $2.518bn. The earnings fall was blamed on investing a further $40m into the business. Sales of bottled water declined in terms of volumes.
In New Zealand and Fiji revenue rose 6.6 per cent to $592.4m as earnings rose 7.3 per cent to $112.4m.
In Indonesia and PNG, sales were flat, just up 0.9 per cent at $981.7m and earnings dived 6.4 per cent to $85.1m. Coca-Cola Amatil said it was continuing to invest in the business but this wasn’t enough to counter soft market condition in Indonesia which included higher commodity prices and a weaker currency.
For its alcohol and coffee division, sales rose 7.7 per cent to $609.8m and earnings rose 12.1 per cent to $55.7m. The business was helped by a strong performance by its Canadian Club brand as well as growth for spirits such as Japanese whiskey.
SPC recorded a $10.4 million EBIT loss for the year.
At 10.23am (AEDT), shares in Coca-Cola Amatil were down 13.5 cents, or 1.61 per cent, at $8.225.