Coca-Cola Amatil flags full-year earnings slump despite strong Christmas in Australia, NZ

Takeover target Coca-Cola Amatil has flagged a full-year earnings slump as its share price exceeds the bid, prompting speculation the offer may need to improve.

Soft drinks giant Coca-Cola Amatil has flagged a slump in full-year earnings. Picture: Justin Sullivan/Getty Images/AFP

Soft drinks giant Coca-Cola Amatil has flagged a slump in full-year earnings, saying on-the-go sales are still volatile in line with COVID-19 outbreaks and lockdowns.

In a trading update ahead of independently audited financial results on February 18, the company said the preliminary expectation for 2020 was a 6.1 per cent fall in revenue after an 8.4 per cent drop in sales volumes.

Volumes decreased in all of its markets – Australia, Fiji, Indonesia and Papua New Guinea – but were flat in New Zealand.

During the all-important Christmas period, Australian grocery trading was strong, as were most channels across New Zealand, group managing director Alison Watkins said.

“Whilst we are encouraged by recent trading in Australia and particularly in New Zealand, month-to-month volatility remains,” Ms Watkins said on Friday.

“This is particularly the case in Australia, where on-the-go trading can vary considerably by state depending on the prevailing COVID-19 restrictions and related sentiment at any given point in time.

Coca-Cola grocery sales have been higher than on-the-go sales during the pandemic. Picture: Paul Yeung/Bloomberg

“Our Indonesian business continues to face challenging trading conditions, with COVID-19 infection rates remaining high and tough macro-economic conditions prevailing.”

The company said demand continued to be high in Australia for Coca-Cola No Sugar and energy drinks.

Ms Watkins said the performance of the New Zealand business had been outstanding, so it was appropriate to repay the $NZ7.2 million ($A6.69 million) stimulus it received from the Ardern government at the peak of the pandemic.

Coca-Cola Amatil also said it expected to report a $289 million reduction in net debt to $1.46bn, crediting disciplined financial management throughout the health crisis.

Ms Watkins said that ensured sufficient liquidity to repay all debt maturities over the next 18 months.

The company has backed a $9.3bn takeover bid of $12.75 per share by Coca-Cola European Partners – the world’s biggest Coca-Cola bottler – with shareholders to be sent a scheme-of-arrangement booklet in early March before voting on the proposed acquisition.

Shares in Coca-Cola Amatil were as high as $13.05 in intraday trade, prompting suggestions CCEP may have to lift its offer.