The write-down of the value of its SPC Ardmona business saw Coca-Cola Amatil’s 2018 net profit slide 37.3% to $279 million.
CCA flagged the write-down earlier this week and took a $146 million hit from the failed move into fresh fruit and vegetable processing and selling.
The write-down though overshadowed the continued slide in CCA’s bottled water sales in its major market, Australia.
Excluding impairment charges and losses from SPC, which is on the market, CCA’s underlying net profit from continuing operations fell 6.5% to $388.5 million as weaker profits from Australian beverages and Indonesia and Papua New Guinea offset stronger earnings from New Zealand and Fiji and alcohol and coffee.
The underlying result topped market forecasts of about $378.9 million.
“2018 was a transition year for Coca-Cola Amatil,” CEO Alison Watkins said in yesterday’s commentary on the full year result. “2019 will be the second year of a two year transition period for the group,” she added.
Earnings last year were also hit by a $40 million investment in an accelerated growth plan in Australia, the introduction of container deposit schemes, economic volatility in Indonesia and operational challenges in PNG.
CCA’s Australian beverage profits fell 8.8% to $376.1 million, but the company points out that after adjusting for $40 million of additional investment earnings would have risen.
Another $30 million will be invested in Australian growth ideas in 2019, meaning more pressure on margins in its biggest market.
Group sales rose 1.1% to $4.75 billion for the year. The company’s performance matched the lowered guidance issued last November when the company said that 2019 would be another year of “transition’ like 2018.
For shareholders, it was a year of transition as well with the final payout steady on 26 cents a share and the total dividend for 2018 unchanged on 47 cents a share and looking unlikely to change very much in 2019 if at all.
While the company said Coca-Cola volumes grew in the second half of 2018, driven by Coca-Cola No Sugar, sparkling volumes fell 0.7% over the year, frozen volumes fell 5.6%, water fell 1.7% and total still beverage volumes by 1.5%
Bottled water volumes fell in supermarkets in the second half as Coles and Woolworths switched from high-low promotions to every low prices formats.
Container deposit schemes also took a toll, forcing the company to raise prices. Container deposit schemes came into effect in the ACT in June, Queensland in November and will be launched in Western Australia in 2020. NSW volumes fell 3.4% for the year, whereas volumes outside NSW fell only 0.4%.
Not helping CCA was the loss of its drinks supply contract with Domino’s Pizza. While it picked up a contract with Pizza Hut that chain has a smaller footprint than Domino’s.
Coca Cola shares fell just on 1% to $8.27 yesterday.