Coca-Cola Amatil Ltd, Australia’s largest beverage company, flagged a second consecutive drop in full-year earnings amid weak consumer confidence and rising costs in Indonesia. Its shares fell the most in more than two months.
Earnings before interest and tax fell 12 per cent from a year earlier to A$317 million in the six months ended 30 June, the company said in a regulatory statement today. Net income fell 16 per cent to its lowest first-half level in three years.
Declining profits add to pressure on new managing director Alison Watkins, who’s reviewing the company’s businesses and considering new products. She faces domestic price competition as Asahi Group Holdings Ltd sells Pepsi as much as 33 per cent cheaper than Coke. Annual net income last year hit a 21-year low due to a A$404 million writedown at its packaged-foods unit.
“Amatil needs to make considerable price investments,” to cut its differential over Pepsi, Michael Simotas, an analyst at Deutsche Bank AG in Sydney, wrote in a 6 August note to clients. “The increasing negativity toward sugar and the resultant reduction in consumption remains a key concern.”
The shares declined 2.1 per cent to A$9.54 at the close of trading in Sydney, the sharpest fall since 5 June. The stock has slumped 21 per cent this year, compared to a 5.3 per cent improvement in the benchmark S&P/ASX 200 index.
Full-year earnings will be “materially below” those during the 12 months ended December, with revenue falling in its alcoholic drinks unit and competition and costs hitting its Indonesian business. The company is trying to cut A$100 million of costs over the next three years, it said today.
Low-Calorie Drinks
Sydney-based Coca-Cola Amatil will offer more low and no-calorie drinks in future as a result of a strategic review announced after Watkins took over its top job.
“As a business we have been slow to adapt to these changes in market conditions and shifting consumer trends,” she said in today’s statement.
Net income in the period was A$182 million, compared with the A$173 million average of three analysts’ estimates compiled by Bloomberg.
Bloomberg News, edited by ESM
