Coca-Cola Amatil (CCA) said “challenging” trading conditions resulted in a 9.2 per cent decline in trading revenue over the first half of 2020. Its margins were adversely impacted by reduced volumes and shifts to lower margin channels and packs as consumers responded to Covid-19 restrictions.
Statutory net profit after tax (NPAT) was a loss of $8.7m versus a profit in 1H 2019 ($168m), reflecting non-trading items of $120.8m, announced on 23 July, relating to Amatil’s Indonesian, Fijian and Samoan businesses. Ongoing NPAT was down 35.3 per cent at $112.1m in the first half of 2020 compared with $173.3 in the first half of last year.
CCA managing director Alison Watkins said the company’s revenue declined in line with volume, but the impact on 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.
“Our tight cost management enabled us to offset some of the adverse impact on earnings. Within this context, it has been pleasing to see consumers turn to their favourite brands, enabling us to achieve market share gains,” Watkins said.
“As Covid-19 restrictions have eased across each of our markets we are seeing signs of improvement. Trading in July has seen group volumes decline by approximately 5 per cent on pcp [prior corresponding period], and in the first two weeks of August, volumes were down 3 per cent on pcp – a significant improvement on the 33 per cent decline we experienced in April.”
Watkins said there were unique, market-wide challenges in this half from Australian bushfires and Indonesian floods to the Covid-19 pandemic, all of which impacted the business.
“Despite these challenges, the resilience of our business was demonstrated by our agile response in addressing changes in channel mix and consumer behaviour, enabling us to grow our market share in key product categories,” Watkins said.
“Our financial performance under these challenging conditions, in particular our strong cash realisation, is a testament to the strength of our business and the tenacity of our people, partners and customers. Our priority has been to ensure a safe work environment for our people, to deliver market share gains and tightly manage our costs with approximately $60m of cost savings delivered in the half.”
CCA said its Australian business saw a dramatic change in consumer behaviour throughout the first half of 2020 as consumer buying patterns adapted to Covid-19 restrictions.
The company said its non-alcoholic, ready-to-drink business experienced a transition of volume to lower-margin channels (such as grocery and national quick service restaurants) and a shift to lower margin at-home-consumption packs (such as multi-serve PET and multi-pack cans). Alcohol and coffee were also adversely impacted, with outlet closures and trading restrictions in the on-premise channel.