Coca-Cola Amatil (CCL) remains concerned by weak consumer confidence and spending in the carbonated beverage category after posting a decline in full-year net profit of over 80%, due chiefly to a writedown on Australian business SPC Ardmona.
Investors responded poorly to the news. At 1205 AEDT, Coca-Cola shares were 5.82% lower at $11.16, against a benchmark index lift of 0.18 per cent. In earlier trade, Coca-Cola shares fell as low as $11.04, the company's lowest point since hitting $10.81 on August 12, 2011.
In the full year to December 31, Coca-Cola's net profit was $79.9 million, an 82.5% decline on the $457.8 million booked in the previous year.
The result includes a writedown to the carrying value of SPC Ardmona of $404 million, which encompasses writing off the remaining goodwill of $277 million, a $39.7 million writedown in the value of brand names and an $87.3 million charge covering writedowns in inventory and property, plant and equipment and recognition of the diminution in value of some onerous contracts.
In the same period total trading revenue was $5.036 billion, a slight 1.2% fall on $5.097 billion in the previous year.
The group will pay a final dividend of 32 cents, 75 per cent franked to shareholders on the register at February 27.
Coca-Cola's total dividend for the year was 58.5 cents, including the final dividend, an interim dividend of 24 cents and an interim special dividend of 2.5 cents.
Managing director Terry Davis said difficult trading conditions for the Australian beverage business in the grocery channel, combined with the impact on SPC Ardmona earnings from imported private label products and the significant slowdown in the Papua New Guinea economy led to a reduction in earnings.
"The positives for the year included the Australian beverage non-grocery channel which delivered volume and earnings growth, the strong return to growth by New Zealand and Fiji and CCA’s re-entry into the Australian beer and cider market in mid-December," he said.
Coca-Cola said difficult trading conditions in the Australian grocery channel resulted in a 9.3% decline in Australian beverage earnings.
While strong volume momentum continued for the Indonesian business, rapid cost inflation, currency depreciation and continued economic challenges in PNG also impacted segment earnings.
SPCA weighs on CCA
The results come as Coca-Cola subsidiary SPC Ardmona continues to dominate headlines in Australia.
The food processor’s request to the Abbott government for $25 million in aid was denied on the basis that it was “not the government’s job to” restructure certain businesses.
"We believe that in this case the government would have to borrow money on behalf of the taxpayers to put into the proposal where we believe Coca-Cola with a very, very healthy balance sheet is able to provide that money from," the prime minister said at the time.
The government said it would support the company if it decided to continue its restructuring and encouraged it to renegotiate enterprise bargaining agreements which were "well in excess" of the award.
"It's very important now that Coca Cola complete the restructuring that they have embarked upon," Mr Abbott said.
In the time since the denial, the Victorian government struck a deal with Coca-Cola for a combined $100 million package will be invested over a three-year period into efficiency measures and innovation at SPC Ardmona. The state government will contribute $22 million, while Coca-Cola will add $78 million to the co-investment.