Shares in Coca Cola Amatil (CCL) yesterday staged a mini-recovery, despite ratings agency Standard and Poor’s downgrading the company’s credit rating in the wake of last week’s downgrade of 2014 earnings.
S&P cut the company’s credit rating from A minus to BBB+, which is still investment grade.
But another ratings group, Moody’s, maintained its A3 rating for the company but changed its outlook to negative, which means there’s a one in three chance of a downgrade in the offing.
Investors ignored the moves by the ratings group and lifted the shares by just 3c to $9.09, hardly the most convincing of rallies.
But after the 20% plus fall on Friday and Monday, it was at least a rise.
CCL 1Y – S&P downgrades Coca-Cola Amatil
Coca-Cola Amatil said the move by S&P would not have any short – to medium-term impact on the company as it had already pre-funded its debt repayments for the next couple of years.
It said all of the debt maturing in this year and in 2015 has already been refinanced with cash held on term deposits at margins above associated borrowing costs.
According to its annual report, the company had $3.1 billion of interest-bearing debt at the end of 2013, partially offset by cash on hand and short term deposits of $1.4 billion.
The company last week surprised the market with a warning of a profit fall of at least 15% for the six months to June 30 because of weak sales growth in Australia, changing tastes among consumers and rising cost pressures in Indonesia, which has been the company’s fastest growing market.
It said its Australian beverages business had suffered due to discounting from competitors and soft sales, while the fall in the value of the Indonesia rupiah, with higher wages and fuel costs had impacted sales and margins growth in the Indonesian business.
New CEO Alison Watkins also announced a strategic review of the company’s operations to look at ways to drive growth, boost productivity and cut costs.
That usually presages writedowns and a series of losses and no doubt job cuts.
