Coca-Cola Amatil annual profit rises but Australia unit struggling

Coca-Cola Amatil’s 2017 net profit rose 81pc after last year’s writedowns, but its Australian unit is battling falling revenue.

Coca-Cola No Sugar was an attempt to overcome the falling popularity of sugary drinks.

Coca-Cola Amatil said its 2017 net profit rose by 81 per cent, but the increase stemmed from one-off writedowns in the prior year and the company continued to struggle with declining revenue in its main Australia beverages unit.

Coca-Cola Amatil (CCL) said its annual net profit was $445.2 million, compared to $246.1 million in 2016. But underlying net profit, which strips out one-off items such as 2016 writedowns on plants and equipment, fell by 0.4 per cent to $416.2 million.

The company previously said it expected underlying net profit to be broadly in line with the 2016 result.

Total annual revenue fell 3 per cent to roughly $5 billion, with revenue in the company’s main Australia beverages unit down 3.3 per cent. Case volume, meanwhile, fell by 2.5 per cent in the Australia beverage unit.

Still, the company declared a final dividend of 26 cents per share, a 4 per cent increase on the prior period.

Looking ahead, the company said a previously announced growth plan for its Australia beverages unit would see an additional investment of $40 million in 2018 across marketing, equipment, technology and price, which would weigh on near-term earnings. Nonetheless, Coca-Cola Amatil said it continues to target mid-single digit earnings per share growth in the medium term.

Coca-Cola Amatil has been struggling with poor performance in Australia, as consumers move away from sugary, carbonated beverages in favour of healthier options. Coca-Cola Amatil rolled out a new sugar-free formulation, called Coke No Sugar, in Australia in the middle of last year to help revive sales. The company also bet that bottled water, like its Mount Franklin brand, and would offset sugary-drink declines.

Despite the full-year declines in Australia, the company said the business improved its trajectory in the second half.

Other challenges facing the company include new container-deposit schemes in variousstates, including New South Wales, which forced the bottler to raise prices. The higher prices could turn off consumers, but a troubled rollout of the program in New South Wales — with few collection points — appears to have hampered public participation so far, some analysts say.

Dow Jones Newswires