Positive Coke Amatil result unspoiled by food division
The beverage bottler posted $158m net profits for fiscal 2018, up 11 per cent on 2017 despite disappointing performance from its food operation.
The beverage bottler posted $158m net profits for fiscal 2018, up 11 per cent on 2017 despite disappointing performance from its food operation.
Narrow-moat Coke bottler Coca-Cola Amatil (ASX: CCL) is considering selling its SPC fruit and vegetable canning business to help grow the company's underperforming food, service and corporate division.
A sale, partnership or merger are among options to be considered, group managing director Alison Watkins revealed at the company's half-year profit results on Wednesday.
"We believe there are many opportunities for growth in SPC, including new products and markets, further efficiency improvements, and technology and intellectual property," Watkins said in a statement.
"Importantly, there are no plans to close SPC. We see a positive future for SPC as it continues to transform its operations."
Morningstar's regional director of equity research Adam Fleck dismissed the announcement as immaterial, noting SPC makes up a tiny part of Coca-Cola Amatil's earnings.
Food, service and corporate was the group's most disappointing segment, turning over losses of $1.7 million compared with an earlier profit of $11.9 million.
Coca-Cola Amatil posted a 12.8 per cent increase in half-year profit, aided by double-digit earnings growth in alcohol and coffee sales and strong performances in New Zealand and Fiji.
Underlying earnings for the group's Indonesian segment was down 0.2 per cent, something the company attributes to soft market conditions.
The beverage-maker and bottler said it made $158.1 million in statutory net profit, up from $140.1 million a year ago, while trading revenue was little changed from a year earlier, at $2.39 billion.
Overall Fleck said he was pleased with the result: "Australia has historically been a sore spot for Amatil, but reinvestment in flavour innovation, product sizes and marketing has led to only a slight decline in volume (0.3 per cent)."
"Water in particular has been a nice turn around for Coca-Cola Amatil in Australia, and New Zealand continues to hit sixes with terrific innovation and execution."
Challenges however continue to persist for the company in Indonesia, Fleck says – a segment which was expected to be an avenue for future growth. Morningstar is still forecasting Indonesia to climb.
In the medium-term, the company is continuing to target mid-single digit earnings per share growth.
A partially-franked interim dividend of 21 cents was announced, unchanged from a year ago.
Coca-Cola Amatil shares were up 20 cents, or 2.1 per cent, to $9.72, as of Wednesday 10:30am.
Performance highlights
• Net profit up 12.8pc to $158.1 million
• Partially-franked dividend 21 cents, unchanged
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Emma Rapaport is a reporter for Morningstar Australia
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