Shares in Coca-Cola Amatil traded at 2018 highs over $10 yesterday after it revealed reasonable results and said it was getting rid of the loss-making SPC canned fruit and tomato business.
The shares ended up more than 3.7% on the day at $9.88, having peaked for the day and year at $10.08.
The company told the ASX in its half year report on Wednesday it was starting a “strategic review” of SPC to consider how to grow the business, potentially through a sale or merger.
The move came after the end of four-year investment of $100 million ($78 million by CCA and $22 million from the Victorian Government) assistance package. That includes anti-dumping penalties back in 2016 on tomatoes imported from Italy in the main.
“There are many opportunities for growth in SPC, including new products and markets, further efficiency improvements, and technology and intellectual property,” CCA said.
“The review will look at how this growth could be unlocked”.
SPC’s brands include Goulburn Valley, IXL, Henry Jones, Taylor’s and Perfect Fruit.
CCA’s results released on Wednesday show SPC flost $1.7 million in the six months to June 29, as sales fell by $4 million due to “the proactive exit of a number of private label lines as well as continued competitive pressure”.
The company said its Ardmona brand tomatoes and SPC baked beans and spaghetti had increased market share but that total sales of those categories had fell during the half.
"We continued to experience pressure in fruit and spreads categories", the company said.
Overall analysts liked the almost 13% rise in half year profit for CCA, but remained worried about the company’s core Australian beverages businesses where carbonated drink sales remain under pressure.
CCA said the improvement in the half year came from strong sales in New Zealand and Fiji.
Net profit for the six months to June 30 was $158 million, up from $140 million in the same period last year.
Earnings before interest and tax (EBIT) rose 6.6% to $257.2 million. Underlying EBIT fell 4.9% to $297.5 million and underlying after tax profit fell 5.9% to $178.8 million.
Total revenue fell 0.1% to $2.417 billion thanks to lower sales at SPC.
It will pay an unchanged interim dividend of 21 cents a share.
The company said the result was thanks to an “excellent” performance in New Zealand and strong earnings growth in Fiji as well as in its alcohol and coffee division, which includes brands Grinders coffeee and Jim Beam bourbon.
The company said there were also "encouraging signs" in Australia, where sales have been weak due to consumers turning away from sugary drinks.
“The stabilisation of revenue and volume in Australian Beverages is consistent with our plans to reinvest cost savings in 2018," CCA managing director Alison Watkins said.
"While there is more to be done, we’re pleased with our progress”.
The company said the Indonesia result was impacted by soft market conditions; Papua New Guinea sales compared to the pre-election stimulus of the first half of 2017 and "experienced some operational issues.”
