Fizzy soda drinks giant Coca-Cola Amatil has revealed planned savings and investment spending cuts totalling just on a quarter of a billion dollars for the rest of 2020.
The group told the ASX on Friday that it would cut costs by $140 million for the rest of 2020 (the company balances at the end of December) and will trim capital expenditure by a further $100 million (to $200 million) in response to the continuing economic shock from the coronavirus pandemic.
Coca Cola Amatil CEO Alison Watkins said on Friday in a statement to the ASX and follow up briefing that the board had decided to temporarily withdraw the group’s dividend payout ratio guidance.
She said this would provide the group with additional flexibility to address any future headwinds or further adverse economic conditions arising from the pandemic.
The company will make a decision on the 2020 dividend at the time of the 1H2020 financial results in August.
It was the second update from the company in a month – the previous one was on March 17 where the company withdrew its earnings guidance for the year.
On Friday Ms. Watkins said Coca Cola Amatil’s debt at March 31 was approximately $1.8 billion, with committed debt facilities totalling $2.6 billion at an average maturity of 5.4 years.
The group has approximately $500 million of committed bank facilities available and $920 million in cash that it holds on bank deposit, providing what she said was “financial flexibility in the current uncertain environment.”
“We have ample liquidity to serve debt maturities of around $305 million which will be due for repayment in 2020, with additional flexibility to pursue strategic opportunities that arise,” Ms. Watkins said in the ASX statement
Looking at first-quarter operations, she said the three months to March was “highly unusual”, given the double-impact of the Australian bushfires in January and then the adverse impacts of the coronavirus.
The group delivered low single-digit percentage volume and revenue growth in March quarter compared to 1Q2019, driven primarily by its Indonesian business.
Earnings, however, were down by mid-teens percentage for the quarter on the prior period.
The company said this reflected the impact of the bushfires in January and February, planned additional marketing expenditure in Indonesia and margin erosion as a result of changes in channel mix in March when social distancing restrictions were introduced.
Ms. Watkins said in the month of March 2020 the group experienced mid single-digit percentage volume growth versus March 2019 as consumers engaged in stockpiling (AKA panic buying).
Earnings, however, was down by low single-digit percentage compared to March 2019 due to the pronounced channel shift to grocery (supermarkets) across our markets, she said.
“The first two weeks of April have included the lead up to Easter and Ramadan which are significant trading periods for our businesses,” Ms.Watkins said.
“This period has been adversely impacted by the COVID-19 and government measures with many customers closed or in decline, and people staying at home across all of our markets.
“As a result, our volumes have reduced by approximately 30 percent on the prior corresponding period, with Indonesia down close to 50 per cent and Australia down approximately 15 percent.”
No wonder the company has dropped its forecasts.