Tough trading conditions throughout COVID-19 has resulted in a decline in Coca Cola Amatil’s 2020 half year results.
CCA has announced a 9.2% decline in its Group Trading Revenue, largely driven by reductions in volumes and shifts to lower margin channels as consumer behaviours changed during restrictions.
However, despite the decline, CCA managed to grow its market share, and this, combined with its ‘strong balance sheet, ample liquidity and solid credit ratings position’, has the company optimistic about its position post-pandemic. Which is further reflected in the (unfranked) interim dividend set by the Board at 9.0 cents.
Profits for the first half of the 2020 financial year were down $8.7 million from a positive gain of $168 million for the same period last year. Group Managing Director Alison Watkins said this was indicative of the unique and challenging trading conditions faced this year, such as the Australian bushfires, Indonesian floods and global pandemic.
“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,” Ms 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 $60 million of cost savings delivered in the half.”
The sudden shift in consumer behaviour hit the Australian business particularly hard, across both the NARTD and alcohol and coffee categories. The NARTD saw a transition of volume to lower margin channels of grocery and QSRs and a take up of more ‘at home’ packs, such as multi-serve PET and cans, Ms Watkins said.
“Whilst we were able to partially offset some of the Australian EBITDA decline through our strong cost management initiatives – with approximately $37 million of savings achieved – the lower Volumes and Revenue resulted in a reduced capacity to absorb fixed costs such as production, sales and support expenses.”
“Our immediate focus has been on driving market share gains in our core categories, helping our customers to sell online and allocating resources to address the shift in geographical demand. We are also focused on adjusting our ‘cost to serve’ to the prevailing market conditions and to improving our network agility to respond to shifts in channel mix, demand volatility and government restrictions.”
The easing of restrictions across much of Australia, bar Victoria and New South Wales has seen a late positive upswing.
“It has been pleasing to see the marked improvement in our trading performance as COVID restrictions have eased with July 2020 Volumes up 3% and the first two weeks of August flat on the respective prior corresponding periods.”
Due to the unpredictability of the pandemic, future restrictions and uncertainty across multiple markets, CCA has said its priorities are currently on driving market share gains, growing its presence in e-commerce and on food aggregator platforms and reducing costs.
“We are taking further action to reduce our ongoing cost structure and will continue to recalibrate according to the requirements of our customers. We have a clear path forward to weather the current conditions, noting that the fourth quarter trading conditions will be imperative to our FY2020 financial performance,” Ms Watkins said.
“We are confident that our strengthened competitive position together with our strong balance sheet, ample liquidity, robust cashflows and solid credit ratings place us in a strong position financially and operationally to emerge a stronger, better business.”