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Alcohol & Coffee delivers double-digit growth for Coca-Cola Amatil

Alcohol & Coffee delivers double-digit growth for Coca-Cola Amatil

Coca-Cola Amatil is celebrating another year of double-digit EBIT growth for Alcohol & Coffee in 2018, bucking the continuing impact of container deposit schemes on the company. 

Alcohol achieved volume growth, high single-digit revenue growth and another year of double digit EBIT growth for the year. Spirits and premix grew ahead of market. Paradise Beverages continued to grow sales. Coffee grew revenue and volume for the year with positive drivers including coffee bean products and sales in grocery. EBIT performance reflected investment in international opportunities including in Indonesia. A new high value premium brand, SoCo Coffee Roasters, was also launched during the year.

Revenue for Alcohol & Coffee was up 8% to $609.8million in 2018, with underlying EBIT at $55.7million, up 12.1%.

Coca-Cola Amatil said the result was driven by strong performance in the spirits and premix segment, driven by Canadian Club, Maker’s Mark and Roku Gin. 

Group Managing Director Alison Watkins noted: “Alcohol & Coffee achieved another year of double-digit EBIT growth while also funding investment in initiatives for our growth aspirations.”

Coca-Cola Amatil group earnings impacted

Coca-Cola Amatil’s full-year results for 2018 delivered underlying earnings before interest and tax (EBIT) from continuing operations of $634.5 million and underlying net profit after tax (NPAT) from continuing operations of $388.3 million. 

The 37.3% slump in full-year net profit was driven by $150 million in impairments due to the soon-to-be-sold SPC business, a loss of in earnings in the soft drinks arm and worsening trading from its Indonesian drinks operations.

Watkins said 2018 was a transition year for the group with earnings impacted by planned investment in the Accelerated Australian Growth Plan, the introduction of container deposit schemes, economic factors in Indonesia and operational challenges in PNG.

“We saw a strong year for the New Zealand, Fiji and Alcohol & Coffee businesses, while there are also positive signs for Australian Beverages with volume growth in Coca-Cola Trademark beverages in the second half.

“Despite the segment result there are also encouraging signs in Indonesia with volume growth over the last nine months of the year. However, as previously reported the Indonesian result was affected by soft market conditions, a weak currency and higher commodity prices. The business is strongly leveraged to capture future growth.”

Australian Beverages sees volume increases

Australian Beverages’ volume share increased for the year, in both sparkling and still beverages.

Watkins said there was volume growth for Coca-Cola Trademark in the second half led by the continued success of Coca-Cola No Sugar. Low- and no-sugar cola achieved low-single digit volume growth for the year, accelerating in the second half. There was also strong volume growth in dairy and energy throughout the year. 

“We continued to see consumer movement towards low- and no-sugar choices. With the success of Coca-Cola No Sugar and low-or no-sugar options in all other major brands, we are well placed to capitalise on this trend,” Watkins said.

“We delivered volume share gains in the water category for the year. However, water volume declined in the second half following changes to promotional strategies with major customers.”

$10million+ EBIT loss expected in 2019 

Watkins said the outlook for 2019 remained consistent with what had been presented previously. 

“2019 will be the second year of a two-year transition phase for the Group,” she said.

“In Australian Beverages, we will be positioned for growth in 2020, with the completion of the additional $10 million of investment in our Accelerated Australian Growth Plan to increase our salesforce and, with container deposit schemes in NSW and Queensland substantially embedded by the end of 2019.

“Our New Zealand & Fiji, Papua New Guinea and Alcohol & Coffee businesses are expected to again deliver growth in line with our Shareholder Value Proposition.”

“For the Corporate & Services segment, we expect an EBIT loss of $10 to $12 million for FY19 in line with the outlook provided in November 2018, due to lower property rental and services earnings, increased Group capability and investment in IT platforms.”

“The Amatil Group is targeting a return to mid-single digit EPS growth from 2020, in line with our shareholder value proposition. Our level of performance depends on the success of revenue initiatives in Australia, Indonesian economic factors and regulatory conditions in each of our markets.”

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