Coca-Cola Amatil shares plunged on Tuesday after the beverage group revealed it will report its first earnings decline in seven years for the June half-year as competition in the grocery aisles from Pepsi and imported packaged fruit take their toll.
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.