Coca-Cola Amatil: Interim result 2015
Recommendation
Few would dispute Australian consumers are drinking less soft drink. Coca-Cola Amatil estimates that the category fell 2% in the half-year ended 3 July 2015. And yet the company reported underlying volumes up by about 1% in the period (actual volumes were up 2.8% but there were three additional days in the period).
In other words, the company took market share. It did so by lowering prices, boosting marketing spending, and launching new packaging sizes. Although it's also possible that the launch of the lower-kilojoule Coke Life provided something of a short-term fillip for the Coca-Cola brand.
Despite that, Australian Beverages divisional profit fell 6%. There was a small profit recovery at last year's problem division, Indonesia and PNG, although there's quite a bit of work to turn it around. However, The Coca-Cola Company's taking of a 29.4% stake in that business has provided Amatil with plenty of cash to do just that.
Half-year to 3 July | 2015 | 2014 | /(–) (%) |
---|---|---|---|
Revenue ($m) | 2,450 | 2,336 | 5 |
EBITDA ($m) | 454 | 448 | 1 |
NPAT ($m) | 187 | 183 | 3 |
EPS (c) | 24.1 | 23.9 | 1 |
DPS (c) | 20.0* | 20.0 | N/a |
Franking (%) | 75 | 75 | N/a |
* Ex date 26 Aug | |||
Note: Figures are underlying results |
New Zealand performed well, while Alcohol and Coffee was very strong (although they're both relatively small divisions). Somewhat frustratingly, the company has chosen to subsume its Food business (SPC Ardmona) into a new nonsensical segment – Corporate, Food and Services – that will obscure its performance.
In total, earnings were flat as expected (see Table 1). Management reiterated that it expects 'no further decline' in earnings per share after 2014, so don't expect much growth this year. The stock is trading on a forecast 2015 PER of 17.
The share price has fallen 5% since Coca-Cola Amatil: Interim Result 2014 (Hold – $9.04) and is within cooee of our Buy price of $8.00. Below that price we'd take a closer look as, while the soft drink market faces challenges, this is a fairly resilient business. HOLD.