Coca-Cola Amatil (CCL) shares drifted lower and then firmed a touch yesterday as investors digested what was a less than effusive update at yesterday’s annual meeting.
Amid the thousands of words delivered in set speeches and in comments from chair David Gonski and CEO Alison Watkins, there was a feeling that the 2016 financial year had started slowly amid tough trading conditions.
The shares drifted down more than 2% in morning trading as the meeting concluded, and then recovered to close off 0.7% at $8.96.
CCL 2Y – Coke struggles for growth
Ms Watkins told the meeting that the company’s target to restore earnings per share growth to around 5% remains on track despite experiencing challenging conditions in the first few months of 2016.
Ms Watkins said consumer demand had been quiet in Australia – despite the above-average temperatures in many parts of the country while currency weakness had pushed up input costs in Indonesia.
“In the first part of 2016, a subdued consumer in Australia continues and weak currency is affecting input costs in Indonesia,” Ms Watkins told the meeting.
"Nonetheless, we aim to take another step forward towards our earnings per share target in 2016. The pace will depend on the success of revenue initiatives in Australia, and economic factors in Indonesia.
"Our capital expenditure will be disciplined and tailored to each business and we expect to generate sufficient free cash flow to allow continued targeting of a medium term dividend payout ratio of over 80 percent,” she said.
She said CCA would also maintain a conservative balance sheet to give it the flexibility to fund future growth opportunities and maintain its dividend payment policy.
“We are sticking to our plans, doing what we said we’d do and I continue to be excited by the opportunity we have to shape a strong future for this company,” Ms Watkins told shareholders.
Broking analysts have trimmed their 2016 profit forecasts for CCA in recent weeks as the company battles aggressive discounting in both carbonated soft drinks and bottled water.
That has seen CCA cut the prices of key brands such as Coca-Cola and Sprite to boost soft drink volume and regain share lost to Pepsi/Schweppes. CCA has also been discounting its leading Mt Franklin brand in an attempt to claw back sales lost to cheap supermarket own branded bottled water.
