Investors sooooo spotted the weakness in the interim results from Coca-Cola Amatil (CCL).
Weak sales in Australia of the company’s core products – carbonated drinks (that’s Coca Cola and its variants). A 7% slide to be exact which helped sales in the Australian market to fall 1.9%.
In other words, consumer fears over sugar in soft drinks remain a potent concern, and CCA is still suffering.
Some investors and analysts said that was good news, but the market overall said ’nope’ and the shares fell 4.4% to close at $9.17 on Friday after an early bounce to a day’s high of $9.67.
That early enthusiasm was based on a first glance at the results and their 7.8% rise in net profit to $198.2 million in the six months ending June.
Shareholders will receive a 1 cent a share rise in interim dividend to 21 cents a share.
Revenue rose 2.8% to $2.5 billion in the six months.
That was due to higher sales of bottled water offset weaker demand for carbonated drinks in Australia, and a solid performances in New Zealand and Indonesia, which is now owned in part by The Coca Cola Company which has a 30% stake. As well the company’s coffee operations continues to do well.
Lower interest costs also helped as did the comparison base a year ago which saw a 0.9% rise in profit because of weak sales of water and carbonated drinks.
Earnings before interest and tax rose 3.2% to $326.9 million, but investors spotted a small fall in earnings in Australia which accounts for 67% of earnings, and concluded that the company has not yet stabilised its most important market.
Australian earnings fell 1.9% in the six months to June to $218 million. It is clear that without price cutting of its key water brands and solid sales in coffee and several other beverage lines, the local business would haver seen a much bigger fall in earnings.
CEO Alison Watkins is trying to lift profit growth to “mid-single digits” by cutting $100 million in costs and other savings and investing the money into marketing, prices and new product development to stimulate volumes.
The company said there was 7% rise in non-alcoholic beverage volumes in supermarkets in the six months ending June, thanks to a 34% jump in bottled water sales offsetting a 3% fall in carbonated soft drinks. CCA was forced to cut water prices and introduce a cut price version to meet growing competition from cheaper water brands. CCA had let its key Mount Franklin brand become too expensive
Sales of CCA’s water brands, led by Mt Franklin, jumped 51% in volume terms but 25% value terms, reflecting the price cuts.
