Coca-Cola Amatil
Recommendation
As previously expected—see Coca-Cola Amatil's wet summer of 21 Dec 11 (Hold – $11.76)—Coca-Cola Amatil announced an unspectacular result for the year ended 31 December 2011. Revenue growth of 7% led to growth of 5.0% in underlying net profit (to $532m). Underlying earnings per share rose 4.3% to 70.2 cents. Directors declared a fully franked final dividend of 30.5 cents (ex date 27 Feb), bringing the yearly total to 52.5 cents.
Year to 31 December | 2011 | 2010 | Change (%) |
---|---|---|---|
Revenue ($m) | 4,801 | 4,490 | 7 |
Underlying EBIT ($m) | 869 | 845 | 3 |
Underlying net profit ($m) | 532 | 507 | 5 |
Underlying EPS (c) | 70.2 | 67.3 | 4 |
Final dividend (c) | 30.5 | 28.0 | 9 |
Franking (%) | 100 | 100 |
Headline numbers, which we've avoided here, were distorted by several one-offs, including a $170m net profit on the sale of Amatil's stake in Pacific Beverages and $110m in after-tax writedowns related to the troublesome SPC Ardmona business.
Considering the year just passed, the results were actually surprisingly resilient. Starting with an extremely wet and flood-effected January/February in the eastern states, it ended with an unusually cold and wet December in the same, important markets. Sagging consumer confidence also took a toll. As a result, the volume of Amatil products sold in Australia actually fell 1.4% in 2011, unusual for this company. Volume in New Zealand/Fiji fell 2.0% in an even softer consumer spending environment, perhaps exacerbated by the Christchurch earthquakes. Only Indonesia/PNG experienced volume growth, of 7%.
Sometimes the weather or economy will turn against a company. That Amatil is able to record underlying profit growth in such an environment is evidence of a high quality business. But the price isn't quite low enough to ensure a margin of safety. The stock is up 3% since 21 Dec 11 (Hold – $11.76) and remains a HOLD.