CCA provides trading update and announces commencement of strategic review


Six weeks into her tenure as Coca-Cola Amatil’s (CCA) new Group Managing Director, Alison Watkins has completed an initial comprehensive review of the company’s affairs after carrying out an extensive touring across CCA’s major businesses.

Coca Cola Amatil Westmead Image credit: Flickr User: Franki Chamaki
Coca Cola Amatil Westmead
Image credit: Flickr User: Franki Chamaki

The CCA Board has requested Ms Watkins lead a comprehensive review of the CCA Group strategy, which has already commenced.

“I am delighted to be on board and have covered a lot of ground in my first six weeks having visited each of CCA’s major businesses and met with many of our key stakeholders. I am impressed with the calibre of the people at CCA, the strong competitive position we enjoy in our businesses and the strength of the relationship we have with The Coca-Cola Company,” Ms Watkins said in the ASX announcement issued by the company.

“It is however clear that CCA is facing a number of immediate challenges, particularly in the Australian beverage and Indonesian markets. 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 also added that she expects the challenging trading conditions to continue in the foreseeable future.

“With the first quarter of trading now complete it is important to provide an update on trading and provide guidance on earnings expectations for the six months to 30 June 2014. The Group has experienced comparative weakness in both Australian beverages and Indonesia and at this stage expects first half 2014 Group EBIT before significant items to decline by around 15% over the prior comparable period. At this early stage of the year, expectations would be for challenging trading conditions to continue,” she said.

The Australian beverage business has posted disappointing results since the turn of the year in both the grocery and non-grocery channels. The company expects this segment to deliver a decline in first half EBIT (earnings before interest and taxes) consistent with the Group EBIT decline.

“The grocery channel continues to be challenging with aggressive pricing activity which has limited CCA’s ability to recover cost increases while consumer demand in the non-grocery channel has been soft in the first quarter and there has been a mix shift to lower margin customers,” Ms Watkins said.

However, the company has fared better in the New Zealand market and continued its positive momentum.

“Overall market conditions in New Zealand have continued to improve and our business has increased earnings and achieved market share gains,” Ms Watkins said.

The PNG business has delivered positive results in terms of volume and earnings growth, but CCA expects the Indonesia & PNG region to deliver only a modest positive contribution to Group earnings in the first half.

“The commercial beverage market continues to grow rapidly, however the competitive landscape is intensifying, limiting the ability to recover cost increases through pricing,” Ms Watkins said.

SPC Ardmona has posted increase in sales revenue of 10% as a result of the strong consumer and retailer support, with the management finalizing details of the significant capital investment and innovation program, which is expected to commence in the second half of the year.