Coca Cola flags 15% drop in earnings

Max Mason
April 11, 2014
The Age
Coca Cola chief Alison Watkins says its Australian beverages business had suffered due to discounting from competitors and soft sales.
Coca-Cola Amatil expects a $56 million hit to earnings in the first half, following soft performances in the Australian and Indonesian beverage markets.
The profit warning came as the group’s new managing director Alison Watkins announced a strategic review of the business.
“We do however need to challenge our model thoroughly in light of the low growth and competitive markets in which we operate in order to deliver long-term sustainable growth,” Ms Watkins said.
Earnings before interest and tax, and significant items are expected to fall 15 per cent in the six months to June 31 from the previous corresponding period which recorded $373.9 million.
“CCA is facing a number of immediate challenges, particularly in the Australian beverage and Indonesia markets,” Ms Watkins said.
Aggressive pricing across Coles and Woolworths has limited Coca-Cola Amatil’s ability to recover increased costs of doing business.
“At the full year result in February, we highlighted that we were concerned by the generally weak consumer confidence and spending environment in Australia and that we faced challenges in Indonesia with substantial cost inflation,” Ms Watkins said.
In February, at the company’s full-year results, Coca-Cola Amatil shareholders were hit with a massive $404 million writedown, following the Victorian state government’s $22 million bail out of its struggling SPC Ardmona fruit cannery.
The company said SPC sales revenue had increased by 10 per cent in the first quarter and management was finalising the details of significant capital investment in the second half of 2014.
Coca-Cola Amatil shares are down 5.4 per cent for the year and last traded at $11.40.
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