Coca-Cola Amatil reaches new heights

Posted by Daniel Palmer on 13th August 2009

Australia’s largest soft drink bottler, Coca-Cola Amatil, has delivered a record first half net profit after tax of $189.8 million as tougher trading conditions fail to quell Australian appetite for soft drinks.

The result, a 10.4% increase on last year, was warmly received by the market and Managing Director Terry Davis.

“Although CCA has experienced tougher trading conditions, it has delivered another record result,” he noted. “Excellent performances from the Australian and Indonesian & PNG beverage businesses, as well as a much improved result from the Food & Services division, continues to reinforce the success of CCA’s organic growth strategy.”

“The New Zealand & Fiji business delivered modest growth in local currency earnings in very challenging economic conditions.”

The Australian beverage division was credited as the major catalyst for growth, as warmer weather and efficiency gains saw earnings growth reach double digits.

“Demand for higher value single-serve products benefited from the favourable summer weather in the first quarter,” Mr Davis said. “Strong price discipline and mix management, combined with efficiency gains and cost savings generated from CCA’s infrastructure development program as well as the increase in earnings from the manufacture and distribution of alcoholic beverages all contributed to the excellent result for the Australian beverage business.”

Volume growth in Australia was up 2.7% led by immediate consumption packs, Glaceau vitaminwater and their Mother energy drink.

The bottler of Coke in Australia said Glaceau vitaminwater had claimed the lead position in functional water within Australia with a market share of over 30%. It has now sold over 41 million bottles since its launch in February 2008.

Meanwhile, Mother – the first successful entry to the energy drink market by the company – has continued to perform well since relaunching last year and now has approximately 30% of the highly competitive energy category in the grocery channel, with sales of over 49 million cans since June 2008.

Coke trademark products, which comprise over 50% of Australia’s total non-alcoholic ready-to-drink beverage volume, continued to perform very well delivering volume growth of 4% and increased market share, led by very strong growth of over 12% for Coke Zero.

SPC improvement

Amatil’s Food & Services division, which has been a laggard due to the ongoing impacts of the drought, showed a marked improvement with EBIT growth of 20.6%. Their cornerstone food business – SPC Ardmona – delivered solid revenue growth in all major categories – fruit, fruit snacks, baked beans & spaghetti, while the completion of the restructure of SPCA’s Australian manufacturing operations in the Goulburn Valley contributed approximately $3 million to final result.

“The grocery channel, which accounts for over 60% of SPCA’s Australian volume, achieved volume growth of almost 10% due to successful new product launches, increased advertising and winning new supply contracts with its key customers,” the company advised in a statement.

A significant increase in imported private label food was seen to negatively impact the Australian manufacturing sector, however.

Beer

CCA’s Pacific Beverages joint venture with SAB Miller continued to increase its share of the Australian premium beer market, according to the firm. The business saw premium beer volume growth of over 50% for the half as a result of the increased availability of its premium beer brands and the successful launch in March of Peroni Leggera.

Despite this, Pacific Beverages delivered a small loss for the half – which included the launch costs for Peroni Leggera.

Guidance

Provided the economy does not deteriorate, Coca-Cola Amatil is forecasting earnings growth in the high single digits on the back of cost-saving initiatives and steady volume growth.

“Notwithstanding the potential impact of the global financial crisis on future demand, we expect that our organic growth will come through the implementation of a strong pipeline of revenue generating and cost saving capital projects,” Mr Davis said. “The increase in production capacity, accelerated placement of cold drink coolers and ongoing new product development will all contribute to this growth and will also further strengthen our leadership position in each of our markets.”