Coca-Cola and beer continue to go well together for shareholders in Coca Cola Amatil, as does fruit, vegetables and its reduced international operations.
The beverage giant yesterday revealed an upgrade to second half and 2007 earnings for the year to December 31, a $170 million buyback and plans to buy the small NSW premium brewer, Bluetongue from adman John Singleton, the private buyout group, Carnegie Wiley and other investors..
That will be done through its beer joint venture with SABMiller, the big international brewer that has already set up a distribution network.
CCA said it is looking at a 10% to 11% rise in net operating profit for the second half and for the full year. That compares to previous forecasts of "high single-digit" earnings growth.
CCA also announced a $170 million off-market share buyback and CEO, Terry Davis said the money would come from the proceeds of selling out of its underperforming South Korean business, which was completed in October.
CCA received a gross amount of round $520 million for that. The net proceeds were around $360 million and CCA said that represented a loss after tax of around $49 million which will be booked as a 'significant' item in the second half of this year.
That $360 million will be split up between buying Bluetongue, repaying debt (around $80 million), the buyback of $170 million and "accelerated capital projects of approximately $110 million.
"The CCA board believes that an off-market share buyback is the most effective method to return capital to shareholders, as participation is optional and there are benefits for both participating and non-participating shareholders," he said in trading update to the ASX.
Mr Davis said the share buy-back would not hit CCA's current investment grade credit rating , its ability to pay full-franked dividends in the future, or have an impact on its ongoing capital expenditure requirements.
"Shareholders who participate in the share buy-back will not be eligible to participate in CCA's final dividend for the year ended December 31, 2007 in respect of those share sold into the buy-back,"
The cost of Pacific Beverages buying Bluetongue wasn't disclosed but CCA said it was not 'material' to either it or its partner, SAB Miller.
Bluetongue was launched in November 2003 and operates from an established boutique brewery near Newcastle, New South Wales. Bluetongue's premium beer brands include Bluetongue Premium Lager, Bluetongue Premium Light, Bluetongue Traditional Pilsner, Bluetongue Alcoholic Ginger Beer and Bondi Blonde.
CCA said the trading momentum seen in the first half had delivered first half growth in earnings before interest and tax (EBIT) of 13.3% and a 10.7% improvement in after tax profit, before significant items.
That momentum "has continued in the second half of 2007. The key priority for CCA in the second half has been the continued recovery of commodity driven cost of goods increases through a number of revenue management initiatives.
"The Australian business has delivered strong revenue and profit growth in the second half from the combination of solid volume growth and good price realisation as a result of CCA's continued investment in new product and package innovation. Higher commodity driven cost of goods sold (COGS) increases, particularly PET resin and aluminium, continued to impact the business, with COGS per unit case expected to increase by over 6% for the second half, the company said in its update.
"The highlight of the second half trading in Australia has been the continued strong performance of the Coca-Cola and Powerade brands, and our Mount Franklin and Pump water brands. Brand Coke in 385ml glass and slim line cans, Powerade Isotonic and Pumped flavoured water have all performed very well and achieved strong volume growth. Brand Coca-Cola continues to be a standout performer, maintaining volumes for the year to date in line with 2006 despite cycling the launch of Coke Zero from 2006.
"Australia's agreement with Maxxium for the manufacture and distribution of the Jim Beam & Cola alcoholic ready to drink range has also provided solid incremental earnings during the second half with good volume growth and the successful launch in September of Jim Beam & Zero Sugar Cola.
"New Zealand has continued to deliver strong revenue and profit growth in the second half driven by good volume growth and price realisation, and despite the impact of continued high commodity driven COGS increases.
"The highlight of the past five months has been the strong performance of the Coca-Cola trademarks driven by continued strong growth in Coke Zero. In addition, New Zealand's iconic brand L&P, re-launched in January 2007, has also delivered strong volume growth in its centenary year", Mr. Davis said.
"Fiji continues to recover from uncertain economic and political conditions as a result of the 2006 coup, with the business delivering good revenue and earnings growth in the second half of 2007, in local currency.
"Following a strong first half, CCA's Indonesian business has continued to perform well as a result of improved mix and good price realisation.
"The business has achieved high single digit volume growth in carbonated beverages, led by very strong growth in Coca-Cola. Good growth was also achieved in the non- carbonated portfolio, with Frestea delivering approximately 20% growth for the year to date. The business also continues to benefit from the mix shift into higher value one way packages in the modern channel, with significant growth in cans and PET.
"For the second half of 2007, CCA expects Indonesia to at least match the record second half profit achieved in 2006, in local currency.
"In PNG, CCA'
