Not happy Terry, that's what the market seemed to be saying to Coca Cola Amatil and its ebullient CEO, Terry Davis. Investors took set against Coca-Cola Amatil yesterday despite a 23% rise in interim earnings.
Higher domestic drink prices and sales in Indonesia saw net earnings rise to $140.9 million in the six months ended June 29, compared to $114.3 million in the first half of 2006.
The 2006 figures included $31.1 million in charges to sack workers and pay tax in South Korea. CCA shares fell 14c to $8.90 and that was in a market that was up around 1% or 64 points.
The shares actually opened 39c lower at $8.65 and fell to a low of $8.57 before recovering in the afternoon rebound in the overall market. But not enough to allow CCA to move into positive territory.
Investors are not happy with the continuing delays to the sale of the troubled South Korean business.
CCA agreed to sell the business to a unit of LG last month for as much as $545 million, but there have been reports of delays as negotiations take longer than expected. The sale is now expected to finish in October, which is later than previously thought.
Excluding one-off charges, profit for the half was $160.9 million, beating the $151 million market consensus. Sales rose 5% to $2.2 billion. But it wasn't enough to offset the impatience over the delayed South Korean sale.
The Australian profit margin, which measures earnings as a proportion of sales, fell to 17.6% from 17.8% as CCA paid more for sugar and resin for plastic bottles.
Earnings from New Zealand and Fiji rose 12% to $34.4 million while in South Korea, earnings excluding charges rose 8.6% to $8.8 million (which is not very much at all).
Earnings in Indonesia and Papua New Guinea turned round to a profit before interest and tax of $3.4 million, from a loss of $11.6 million in the first half of the previous year.
Worrying analysts was this comment in the report:
"Increases in commodity input costs continued to impact on CCA's manufacturing cost base. Higher commodity costs, specifically aluminium and PET resin, partially offset by a stronger Australian dollar, have driven an overall increase in the cost of goods sold (COGS) for CCA's beverages of $73.6 million for the first half of 2007. Excluding South Korea, COGS increased by 9.6%. Including South Korea, COGS increased by 4.0%."
Revenue was up 4.7% and it seems price rises and the turnaround in Indonesia (which was equal to $14 million on a comparative basis) couldn't convince investors
Nor did a repeat of the guidance for the rest of the year win hearts and minds:
"Assuming the continuation of current trading conditions and with the important summer trading season for Australia and New Zealand still to come, CCA expects to be able to deliver high single-digit EBIT growth for the second half of 2007."
That's still pointing an earnings slow-down.
………………
And printing and distribution company PMP Ltd's 11.3% lift in earnings before interest, tax and significant items (EBIT) to $91.3m for the 12 months to 30 June 2007, wasn't enough to offset market disfavour.
The shares fell 7c to $1.53 as the company told the market that 2008 wouldn't be much better than 2007.
Even the first dividend for years couldn't win the hearts and minds of investors.
Chairman,Graham Reaney said net profit after tax increased 37.9% to $46.4 million and this allowed the Board to declare a final, fully-franked dividend for fiscal 2007 of 3 cents a share.
The dividend, PMP's first in seven years, will be paid on October 19.
Investors said , 'ho hum'. After all, PMP had been a private equity favourite last year after receiving several approaches. But nothing eventuated and the shares are down around 25% from their 52-week high of $2.09.
PMP said sales rose3.5%to $1.288 billion for the year. Earnings before interest, tax, depreciation, amortisation and significant items (EBITDA) were $128.3m, an increase of 10.8% on the previous year.
And why the disfavour?
"While we have good reason to be pleased with the performance of PMP's diversified business mix over 2006/07, we remain conscious of the challenges ahead, particularly in the print and distribution markets," CEO, Brian Evans said in a statement.
"We note that the effects of over-supply in the commercial printing market are still to be worked through fully, requiring our continued rigorous attention to cost management and efficiency measures.
"While it's too early to provide a forecast for H1 of fiscal 2008, given the pricing pressure in our core printing, distribution and fulfillment markets, we don't expect the full-year earnings performance to be significantly different to the last financial year.
"Further earnings guidance will be provided at our Annual General Meeting in November 2007," Mr Evans said.
And that was that. Like Telstra, no real improvement in the coming six to 12 months.
Hopefully that is not going to become a trend this reporting season…
