By Sarah Danckert
Coca-Cola Amatil shares have dropped after the fizz went out of the group's first-half earnings, with more Australians taking a pass on soft drinks and price pressure in its branded water business crimping its profit growth.
The company on Wednesday revealed a 29.3 per cent drop in half-year profit to $140.1 million for the six months to June 30.
Earnings before interest and tax its Australian beverages segment fell 13.2 per cent to $182.9 million during the half following a weak Easter period.
Revenue in the first half declined 3.7 per cent to $2.42 billion. Underlying earnings before interest and tax also dropped, down 4.3 per cent at $312.7 million.
Coca-Cola Amatil's earnings are down as fewer Australian drink sugary soft drinks.Credit: Vincent Mundy
Driving the decline was a 3.8 per cent fall in fizzy drinks, which includes Coca-Cola products, sold during the period. Sale volumes in its local brands of still beverages – which includes Mount Franklin water – were down 8.5 per cent for the six-month period.
The company declared a half-year dividend of 21 cents per share payable on October 3.
Coca-Cola shares dropped 2.66 per cent to $8.245 on the weak result.
Coca-Coal Amatil expects profits to be flat for the full year, missing its long-standing pledge to deliver earnings per share growth in the mid-single digit range.
Coca-Cola Amatil managing director Alison Watkins says its Australian beverages business has improved since Easter.Credit: Paul Miller
The company is facing resistance from the two major supermarket chains, Woolworths and Coles, to stock its full range of Mount Franklin water.
Woolworths has also declined to stock the group's new No Sugar Coca-Cola drink, and the soft drink company recently lost a major contract with the Domino's pizza franchise.
Woolies and Coles don't want to give shelf space to the full range of Mount Franklin water.Credit: Peter Morris
Chief executive Alison Watkins said the company planned to pass on the 10¢ levy on disposable bottles in NSW onto its customers, which include Woolworths and Coles.
"We'll be working with our customers. We intend flow through costs of the deposit and the associated costs of the scheme," Ms Watkins said.
Ms Watkins declined to say whether the new levy would crimp Coca-Cola Amatil's ability to reduce prices of bottled water to compete with lower-cost products.
She said that after a weak Easter trading period, performance in Australian beverages has been growing.
"Since Easter we have seen pricing pressure in Sparkling Beverages ease compared to the prior half, and volume in branded water has grown with investment in price in the last few months," she added.
Woolworths chief executive Brad Banducci said on Wednesday Coca-Cola Amatil remained a key partner despite the supermarket chain deciding to not stock Coke No Sugar.
"It just really was adding a lot more space into there and the impact was something that we were struggling to do, but we're continuing to work with them on trying find a solution to meets both of our needs," Mr Banducci said.
Coca-Cola Amatil's Indonesian and Papua New Guinea business also concerned analysts as it delivered a 37 per cent increase in earnings before tax and interest despite volumes and revenue falling.
Macquarie analyst Andrew McLennan questioned the company's performance in the region.
"It's quite a surprising performance, I'd imagine there would be some disappointment in terms of the volume growth outcome within Indonesia," Mr McClennan said.