Shares tumble 10% on news of decline in earnings
CCA said the strong performance from its other business units — Indonesia, New Zealand, Fiji and Australia's non-grocery sector — would not be sufficient to offset the impact of difficult trading conditions for its beverages in supermarkets and the decline in SPC Ardmona's 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 annual meeting.
The beverage weakness is expected to be short term, partly reflecting the competitive discounting CCA engaged in as Pepsi launched Pepsi Next, but the poor performance of SPC Ardmona reflects the weak fundamentals of the business against cheap foreign 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 [per cent] to 3 per cent for 2013," Mr Davis said.
CCA said it expected a fall in earnings before interest and tax (EBIT) of 8 per cent 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, with full-year EBIT before significant items expected to be "broadly in line" with the previous year.
Frequently Asked Questions about this Article…
Coca‑Cola Amatil (CCA) revealed it would report its first earnings decline in seven years for the six months to June 30. The company blamed tough supermarket trading for its beverages — increased competitor discounting (including activity around Pepsi’s Pepsi Next) and lower retailer inventory levels — plus a drop in SPC Ardmona’s earnings, which together prompted the share price fall.
CCA said it expected earnings before interest and tax (EBIT) for the first half to fall by about 8% to 9% before significant items.
CCA said SPC Ardmona’s poor performance — driven by weak business fundamentals versus cheap foreign imports and low‑priced private label fruit — could lower group earnings by around 2% to 3% for 2013 if the retail trading outlook doesn’t improve in the second half.
Yes. CCA described the beverage weakness as expected to be short term, partly because some of the pressure came from competitive discounting tied to Pepsi Next. The company expects a return to earnings growth on higher volumes in the second half.
CCA said its businesses in Indonesia, New Zealand, Fiji and Australia’s non‑grocery sector were showing strong performance, but they were not sufficient to offset the supermarket beverage weakness and SPC Ardmona’s decline.
Managing director Terry Davis said the grocery channel had a very difficult start to the year due to continued higher levels of competitor discounting and reduced retailer inventory levels, which hurt beverage volumes in supermarkets.
The stock fell more than 10%, dropping $1.52 to $12.93 following the earnings downgrade announcement.
Key takeaways: CCA reported a short‑term earnings hit driven by supermarket competition and SPC Ardmona’s struggles with cheap imports; management expects H1 EBIT to be down about 8–9% but sees a rebound in volumes and earnings growth in the second half, with full‑year EBIT expected broadly in line with the prior year. Investors may want to monitor supermarket trading conditions, SPC Ardmona’s recovery, and CCA’s half‑year results for signs the recovery is materialising.
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