Coca-Cola Amatil Ltd (ASX: CCL) disappointed investors in 2013. The iconic beverage maker announced a 22.3% drop in net profit after tax for the 2012 year, impacted by write downs of nearly $100 million.
Shares have been struggling ever since, but it seems that the market is overlooking the company's massive growth potential in the Indonesia and PNG region, providing long-term investors an opportunity to buy a great company with enduring potential.
Similar to other top performing companies including Ramsay Health Care Limited (ASX: RHC) and Commonwealth Bank of Australia (ASX: CBA), a central focus for Coca-Cola is targeting the growing middle class of Indonesia.
Just like the Australia division, Coca-Cola's Indonesia branch earns revenues from the manufacture, distribution and marketing of non-alcoholic drinks. Only the market in Indonesia is potentially much, much bigger.
Indonesia has a population of 247 million – about twice as large as Japan and nearly ten times larger than Australia and New Zealand combined – and has a forecast GDP growth rate of 5.6% in 2014.
Coca-Cola Amatil's growth in Indonesia has been well in excess of the country's recent historical GDP and although it has been a slowing trend, the region now accounts for almost 13% of Coca-Cola Amatil's earnings before interest and tax (EBIT).
| Year | EBIT ($ millions) | Growth |
| 2009 | $61.8 | 22.1% |
| 2010 | $75 | 21.4% |
| 2011 | $88.1 | 17.5% |
| 2012 | $102.9 | 16.8% |
Above: Indonesia & PNG EBIT growth over the last four years. Source: CCL annual reports.
This growing EBIT, well in excess of the rate of inflation, helps to support Coca-Cola Amatil's growing dividend. Last year the dividend was increased 13.3%, satisfying blue-chip investors seeking a cash return and a dollop of growth.
Foolish takeaway
Coca-Cola Amatil shares are still being punished by the market and dipped below $11.50 in December. They have only recovered slightly to around $12 today. Although the company's overall performance has been muted in the last 12 months, the potential for big long-term growth from the Indonesia and PNG region is a standout aspect of the business and makes now a great time to buy the company to hold for the long-haul.
