Excuse me for being a little cynical, but the full year result from Coca-Cola Amatil (CCL) has done just that. Trading revenue (that is from selling its products) rose a mere 1.1% or a mere $57 million over the year (or one million bucks extra a week).
Profit before one off items rose 6.2% to $417.9 million from $3893.4 million. After one off items – of which there was just one, a $171.8 million impairment of the SPC Ardmona business – statutory profit was down 37% at $246.1 million from $391.4 million in 2015.
Total dividend for the year was lifted to 46 cents a share from 43.5 cents a share by the payment of a final of 25 cents, up from 23.5 cents.
And the company announced a share buyback of $350 million (or around 4% to 4.6% of the issued capital, depending on price) to start next month.
And the company is closing is main base of operations in Adelaide, moving some of them to Queensland, Perth and Victoria and spending $90 million expanding a manufacturing operation at Richlands in Brisbane.
And to top off the cynicism – most of Australia had a warm 2016, especially the start of the year and the closing months of Spring and Early Summer – and that is supposed to be good for soft drik makers (and beer and whine companies).
But the fall in volumes in Australia says Coca Cola Amatil didn’t manage to exploit the warmest year on record as well as it should have.
So a weak trading performance with revenue growth that didn’t keep pace with inflation over 2016, a slightly better profit, but another bad year for SPC Ardmona (taking total impairments now in the past three years to a massive $576 million), and shareholders get rewarded as the much touted remake of Coca Cola Amatil again struggles to gain traction.
But nevertheless, investors loved it (the buyback), the shares rising more than 5% at $10.48.
No wonder, the buyback and the higher dividend look like the usual moves to keep restive shareholders quiet and wealthier while a company’s board and management struggle with a problematic remake or change of strategy
Outgoing Coca-Cola Amatil chairman David Gonski defended the buyback, saying the company had capitalised on strong cash flow and “confidence in our future trajectory”. He said the “share buyback provides the most appropriate mechanism to return surplus capital to shareholders at this time.” Mr Gonski steps down at the AGM in May.
That was despite another year or indifferent or falling soft drink sales as consumers continue their move away from sugary drinks (especially in developed markets such as Australia and NZ which remain the core of CCL’s sales and earnings).
The company said that its Australian beverages performance was hit by pressure on the cola (the company’s core product) and water categories. Earnings before interest and tax fell 1.8% and revenue was down 3.4% as volumes dropped 2.1% over the year.
The 6.2% rise in “underlying” net profit to $417.9 million came from a solid performance in Indonesia and Alcohol & Coffee offset by the drop in Australia.
Overall volumes in the still beverages division increased 3.1% over the year, driven by water, energy and dairy segments, but the second half was impacted due to challenges in the sports, tea and juice categories. Ms Watkins said the sparkling business is under pressure but she is confident that a number of iniciatives are in train that will help get consumers buying again.
“Sparkling business clearly is under volume pressure and we are working closely with the Coca -Cola Company (the biggest shareholder) across a range of initiatives,” she told analysts on a call.
"It’s very much on driving transaction and revenue growth. Volumes are important as part of that, but the goal is to stabilise and grow revenue back in positive territory. Small packs and premium offers are all part of that." She said there would be new packaging and a new approach around no sugar varieties later in the year are all things to help this category.
The capital management move came as the company said the continuing review of its supply chain had led to the decision to shut its Adelaide manufacturing hub which will see the loss of 180 jobs.
Coca-Cola said it had reviewed its operations across Australia and concluded it should increase production in Queensland and Western Australia and close its plant in the Adelaide suburb of Thebarton, which produces glass bottles, fruit juice, dairy products and some alcoholic beverages.
“The review found that further development of our facility at Thebarton in South Australia was constrained by its CBD location, site layout, dated infrastructure and expensive logistics," CCA’s managing director Alison Watkins said in a statement.
This isn’t a decision we have taken lightly, but we know it will be important for ensuring our position in the market into the future." Ms Watkins said in yesterday’s statement CCA would provide financial counselling and help find new jobs for workers affected by the 180 lost jobs. Existing administrative, distribution, and recycling work would remain in South Australia, she said.
CCA said it will spend $90 million building a new glass production line and juice and dairy production capacity at its plant in Richlands, on Brisbane’s outskirts, in addition to the $75 million investment announced last year.
