Coca Cola Amatil (CCL) has gotten one bit of nasty news out of the way – the long anticipated revamp of its Australian beverages unit – the sales and profit heart of the company, containing the key portfolio of fizzy drinks, which are the company’s reason for being.
The restructure was revealed in a statement yesterday from the company’s newish CEO Alison Watkins (who used to run GrainCorp which reports later this week). It was revealed a day ahead of the company’s AGM in Sydney later today.
By splitting the news flow, the company seems to be saying they want investors and the market generally to focus on what was revealed yesterday, and the trading update for the first quarter and June half year, due to be released at the meeting today.
In mid April the company 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 Indonesian Rupiah, with higher wages and fuel costs had impacted sales and margins growth in the Indonesian business.
Shareholders will be looking for an update on the warning, and those problems in Indonesia.
CCL 1Y – Coca Cola Amatil starts to cut to improve profits
Yesterday’s announcement was part of the revamp of the Australian business – we have yet to see job losses and asset impairments, which seem customary in these sorts of situations where a new CEO takes over, especially after a long serving one retires as Terry Davis did after more than a decade at the helm of the company.
John Murphy, the head of the Australian beverages business, was the one casualty in yesterday’s statement. He will leave the company as part of a restructure of the business into two businesses, the licensed and alcohol, and non-alcoholic beverages units which will now report separately to Ms Watkins.
Mr Murphy is the second senior executive to leave CCL since Ms Watkins took over from Terry Davis in February. The other was the company’s Australasian managing director, Warwick White, who agreed to leave in February following a review of the Australian business’s management structure.
The head of CCL’s New Zealand operations Barry O’Connell will take on the new role of managing director of non-alcoholic beverages.
Ms Watkins justified the changes, saying in yesterday’s statement:
"Our core non-alcoholic beverages business unit will require strong leadership and close alignment with our partner The Coca Cola Company to execute against an agreed strategy which will leverage CCA’s strengths and drive transformational change.
"The licensed and alcohol business unit will report directly to me to enable greater speed of response to market, facilitating a more entrepreneurial approach within a different industry sector, working closely with our partners to identify and capitalise on growth opportunities.
"Regrettably, as a result of the above structural change and appointments, John Murphy, CCA’s current Managing Director – Australian Beverages, has agreed that there are no suitable positions within the new organisation and has decided to leave CCA, after ensuring a smooth transition period, at the end of June.
“I would like to thank John for his obvious passion, energy and enthusiasm for the business which he displays on a daily basis, and of course the tremendous impact he has had, particularly in developing our beer and spirit portfolio and strategy, which will be his legacy with CCA.
“The strategic review being undertaken recognises that we are moving into a different era as market conditions across the Group become more competitive and growth becomes more difficult to achieve. An organisation structure which provides a strong focus on the performance and strategy of each of our businesses is important,” Ms Watkins said in yesterday’s statement.
As a result she said that, "From 1 June 2014, the Non-Alcoholic Beverages and the Licensed & Alcohol business units will report separately to the Group Managing Director".
The company’s shares rose 2.5c to $9.13 yesterday. Today’s AGM and trading update will have a bigger potential impact on the share price.
