The Coca Cola Amatil Ltd (ASX: CCL) share price is moving higher today, despite the bottling company reporting drops in revenue, earnings and profits and a dividend cut in its half-year (1H20) result this morning. The Coca Cola share price started the day at $8.75 at market open and is up 4.57% at the time of writing to $9.15.
What did Coca Cola Amatil report this morning?
Coca Cola reported a 9.2% drop in revenue to $2.186 billion, down from $2.406 billion in 1H19.
Earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at $370.5 million, down 19.4% from 1H19’s $459.7 million.
Meanwhile, ongoing net profit after tax (NPAT) also slumped, down 35.3% to $112.1 million from 1H19’s $173.3 million.
Amatil reported a statutory loss of $8.7 million (down from a profit of $168 million) after accounting for a write down in the value of its Fijian, Indonesian and Samoan assets.
Pleasingly for shareholders, an unfranked interim dividend of 9 cents per share was announced. It’s a long way from the company’s final dividend of 26 cents per share that was paid in February, but something is better than nothing. Amatil’s Managing Director Alison Watkins had this to say on the dividend: “We recognise the importance of dividends to our shareholders. We will continue to monitor market dynamics and intend to resume a higher dividend payout ratio as soon as possible”
Coca Cola Amatil hit by a perfect storm
The company has been hard hit by both the destructive bushfire season last summer, as well as the coronavirus pandemic and associated lockdowns earlier this year (and ongoing in Victoria). Both of these events have squeezed Coca Cola Amatil’s high margin distribution channels such as restaurants and events. This has resulted in an increase in lower margin ‘grocery’ sales. This is reflected in the company’s Australian market earnings (EBIT) margin, which fell from 12.9% in 1H19 to 9.2% in 1H20.
Overall, volumes of non-alcoholic ready to drink beverages fell 8% from 146.4 million cases in 1H19 to 134.7 million in 1H20. One bright spot was the company’s spirits division, which increased volumes by 10.8%.
Here’s some of what Amatil’s Managing Director, Alison Watkins, had to say on the numbers:
We experienced unique, market-wide challenges this half, ranging from Australian bushfires and Indonesian floods through to the COVID-19 pandemic which impacted all our businesses…
Our revenue broadly declined in line with volume, however, the impact on our group margin percentages was much greater (particularly in Australia), reflecting the compound impact of reduced volumes and marked shifts in channel and pack mix as consumers adapted to the COVID-19 restrictions.
Today’s results will be of little relief for Amatil shareholders. The Coca Cola share price has essentially gone nowhere since 2014, and remains around 40% off of the company’s all-time high share price of $15.24 that it hit back in March 2013 (7½ long years ago). The Coca Cola share price has also lagged the gains of the broader S&P/ASX 200 Index (ASX: XJO), which has recovered more than 34% since 23 March. Coca Cola shares are only up 13% over the same period.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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