Soft drink and alcohol group, Coca Cola Amatil (CCA) says it is on track for high single digit second half earnings growth after posting a surprisingly strong 22% lift in interim profit.
The drinks maker said net profit came in at $171.9 million in the June 30 first half, compared with the $140.9 million result it achieved in 2007 when earnings were hurt by higher commodity costs.
The company told the ASX that it would maintain its guidance of high single digit earnings before interest and tax growth for the second half and the year (In May it gave guidance of high single digit growth for both the first half and the full year).
But there will be an update later in the year… in October, not at the AGM but an investor briefing the company holds most years at that time.
The company said that on a continuing operations basis, interim net profit of $171.9 million was 10.4% better than last year’s $155.7 million.
"The trading conditions in the first half of 2008 were more difficult than in 2007," the company said.
"CCA maintains its guidance of high single-digit EBIT growth for the second half of 2008 and it said it’s expected the full year increase in cost of goods sold per unit case to be just over 3% per unit case on a constant currency basis.
"The trading conditions in the first half of 2008 were more difficult than in 2007.
"CCA maintains its guidance of high single-digit EBIT growth for the second half of 2008 with a target of around 7% EBIT growth, before significant items and on a continuing operations basis.
"As the important summer trading season for Australia and New Zealand is still to come, a further trading update will be provided in mid October and will coincide with the CCA annual investor presentation day."
For 2008, we expect the full year increase in cost of goods sold per unit case to be just over 3% per unit case on a constant currency basis. We will continue to target the recovery of cost of goods increases across each of the business units for the remainder of 2008.
CCA’s group managing director Terry Davis said the manufacturer delivered a strong result despite tougher trading conditions.
The Australian and New Zealand beverage businesses had performed well while the Indonesian operations continued to grow, he said.
"The result has been driven by well balanced revenue and mix management and tight cost control programs across the business," he said.
"In addition, CCA continues to benefit from efficiency gains from its capital spending program while the manufacture and distribution of alcoholic beverages contributed nearly 20 per cent of the Australian beverage business growth."
The company said Earnings per share (EPS) increased by to 23.3 cents per share, while on a continuing operations basis EPS increased by 12.6% to 23.3 cents per share.
The interim dividend, fully franked, has been increased from 15.5 cents to 17.0 cents per share, representing an increase of 9.7%.
CCA’s Group Managing Director, Mr Terry Davis said, “CCA has delivered another strong profit result in tougher trading conditions with excellent performances from the Australian and New Zealand beverage businesses, and the continued growth of our Indonesian operations.
"The result has been driven by well balanced revenue and mix management and tight cost control programs across the business. In addition, CCA continues to benefit from efficiency gains from its capital spending program while the manufacture and distribution of alcoholic beverages contributed nearly 20% of the Australian beverage business growth.”
He said the highlight for the half year was the resilience of the Australian beverage operations, particularly in the second quarter. “The Australian business delivered 10.0% EBIT growth for the half despite being impacted by poor weather and heavy discounting by our major competitor in the first quarter," Mr Davis said..
"The earnings result was driven by a strong second quarter trading performance with 2.0% volume growth while continuing to recover cost increases and grow margins,” Mr Davis said.
- Australia – EBIT growth of 10.0%. The half year was characterised by two contrasting quarters. In the first quarter, poor weather in the key markets of NSW and Queensland and heavy discounting by our major competitor in the grocery channel materially impacted volumes. By contrast, trading in the second quarter recovered well with volume growth of 2.0%, with performance strengthening in May and June.
- New Zealand & Fiji – EBIT growth of 11.0%. Despite the impact on translation of a 5% devaluation of the New Zealand dollar and a weaker result from Fiji, New Zealand continues to capitalise on gains made in 2007 with a standout local currency EBIT growth of 18.1%. The results were driven by over 3% volume growth, improved pricing and the continued efficiency and cost savings from the Trans-Tasman integration.
- Indonesia & PNG – EBIT growth tripled to $10.4 million, with the region achieving solid volume growth of 4.6%. Indonesia experienced a solid start to the year with local currency revenue growth of 12.6%. This was despite a longer than usual rainy season and the cycling of a strong first half 2007 result. The Indonesian operations continue to drive the shift into the higher margin one-way-pack formats and to grow share in the fast growing Modern Foodstores channel.
- Food & Services – EBIT growth of 7.2%. SPC Ardmona’s (SPCA) inter
