Amatil shares plunge on earnings decline
CCA said the strong performance of its other business units - Indonesia, New Zealand, Fiji and Australia's non-grocery sector - would not be enough to offset the effect of difficult trading conditions for its beverages in supermarkets and the decline in SPC Ardmona earnings.
"In Australian beverages, the grocery channel has experienced a very difficult start to the year due to the continuation of higher levels of competitor discounting and the impact to volume from lower retailer inventory levels," managing director Terry Davis told investors at the company's annual meeting.
The beverage weakness is expected to be short term, partly reflecting the competitive discounting CCA engaged in as rival Pepsi launch Pepsi Next, but the poor performance from SPC Ardmona reflects the weak fundamentals of the business against cheap imports.
"The shelf prices of many imported private label products are being sold at levels well below the cost of Australian-grown packaged fruit and should the retail trading outlook not improve in the second half, the SPCA earnings decline is expected to lower group earnings by between 2 and 3 per cent for 2013," Mr Davis said.
CCA said it expected a fall in earnings before interest and tax (EBIT) of 8 to 9 per cent for the first half, before significant items.
The stock fell more than 10 per cent, down $1.52 to $12.93.
A return to earnings growth on higher volumes is expected in the second half of the year.
CCA expects to declare a dividend of 26.5¢ a share for the first half.
Frequently Asked Questions about this Article…
Shares fell after CCA revealed it will report its first earnings decline in seven years for the June half, driven by difficult supermarket trading for beverages (competition and discounting from Pepsi and lower retailer inventory) and weaker SPC Ardmona earnings; the stock fell more than 10%, down $1.52 to $12.93.
CCA said it expects a fall in earnings before interest and tax (EBIT) of about 8–9% for the first half before significant items.
SPC Ardmona performed poorly against cheap imported packaged fruit, and CCA warned that if retail trading doesn’t improve in the second half the SPC Ardmona earnings decline could lower group earnings by around 2–3% for 2013.
No — CCA described the beverage weakness as expected to be short term, partly due to competitive discounting (including activity around Pepsi Next), and it expects a return to earnings growth on higher volumes in the second half.
CCA said strong performances in Indonesia, New Zealand, Fiji and Australia’s non‑grocery sector helped but were not enough to fully offset weak supermarket beverage trading and SPC Ardmona's decline.
Yes — CCA expects to declare a first‑half dividend of 26.5 cents a share.
CCA’s managing director Terry Davis pointed to higher levels of competitor discounting (notably from Pepsi activity) and lower retailer inventory levels, which reduced volumes in the grocery channel.
Investors should monitor second‑half trading and volume recovery, SPC Ardmona’s performance versus cheap imports, any continued competitor discounting in grocery channels, and updates to CCA’s earnings guidance and dividend plans.
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