No good news for Coca Cola Amatil shareholders about its struggling market operations at its annual meeting yesterday.
The meeting was told that its beverage sales haven’t picked up since it again warned of problems last month. (These problems have bedevilled the company now for the past five-years).
The shock profit downgrade last month sent shares tumbling, as the company warned all its channels were experiencing volume and price pressure.
Shares in Coca-Cola Amatil lost 0.2% to $9.60 after
The group’s expecting underlying net profits after tax to decline in the first half of 2017, leading to lower franking credits.
On the plus side for investors, the share buyback program started in April is underway, with $268 million still to be spent taking shares off-market.
That is needed because of the continuing blows to investor belief in what used to be one of the more highly regarded industrial stocks.
Managing director Alison Watkins told the meeting that full year underlying net profit after tax for 2017 is expected to be broadly in line with last year’s $417.9 million which was then a 6.2% rise.
“When we first outlined our strategy in 2014 we were clear that our target was returning the business to mid-single-digit earnings per share growth in the next few years,” she told shareholders.
However, trading for Australian Beverages has so far been weaker than last year due to strong competition and changes in demand.
“In particular, we experienced price devaluation in sparkling, pressure on our mainstream water brand and bore higher cost of goods sold,” she says.
“We will continue with our plans to respond to the changes in the Australian market. We also know our diversified business portfolio is our strength and can mitigate some of this impact.”
Chairman David Gonski told his last AGM that the company needs more time to lift its performance. "So far this year we have experienced weaker than expected trading conditions in Australia, which will impact our performance in 2017," Mr Gonski told shareholders in Sydney.
"We are continuing with our strategies to address these issues – which include rebalancing the portfolio in partnership with The Coca-Cola Company – and we recognise that more time is required for these initiatives to gain traction."
CCA has also been slashing costs, recently adding another $20 million in cost reductions to the $100 million delivered in 2014 and 2015 and the $100 million announced in 2016.
But many analysts that follow the company say cost cutting is unsustainable and CCA will have to restore sales and volume growth in Australia, its largest market, to meet mid-term targets.
As part of a board renewal process, three other long-serving directors retired at the AGM – David Meiklejohn, Wal King and Tony Froggatt – reducing the size of the board from 12 to nine. It will take more than that to renew the company’s performance.
