It's been a tough two years for shareholders of Coca-Cola Amatil Ltd (ASX: CCL). With the stock down nearly 40% since March 2013 many investors will no doubt have considered selling out at one point or another.
But those investors could soon be pleased they chose to stick around with the company much more optimistic for what 2015 could entail.
The Outlook
Not much has gone right for the beverage manufacturer recently. Its market dominance been threatened by a pricing war with Schweppes; pressures from Coles and Woolworths Limited (ASX: WOW); a strong Aussie dollar and wage inflation in Indonesia.
Looking to turn the ship around, Coca-Cola Amatil's management team implemented a strategic review, aimed at reducing costs and improving productivity, whilst also exploring ways to strengthen the brand's image moving forward. Here are a few things they've come up with…
- Costs: Management now estimates that up to $100 million in annual savings could be made over the next three years, which would greatly improve the company's profitability moving forward.
- Marketing & Product Development: The savings will largely be put towards improved marketing campaigns and new product development, which should strengthen CCA's market position. It has already introduced a new 250mL can which is designed to make its products more affordable.
- Healthier: A major concern amongst investors has been the growing health trend of consumers. Coca-Cola Amatil has announced its first new cola product since 2006, named Coke Life, which will debut in 2015. Coke Life is sweetened with stevia and has 60% less calories than normal Coke products.
- Indonesia: The Asian nation has long been seen as CCA's major growth prospect, but it has significantly underperformed in recent years. However, a new deal with The Coca-Cola Company (NYSE: KO) will see hundreds of millions of dollars pumped into the division in the coming years which should boost returns substantially.
Should you buy?
In late October, CCA's Managing Director Ms Alison Watkins said she is expecting "a return to mid-single digit growth in earnings per share over the next few years with no further decline expected after 2014." While the company is by no means out of the woods yet, it is certainly a more optimistic prospect for investors moving forward.
Making it even more attractive is the expectation that it will pay a dividend of 42 cents per share (cps) in financial year 2015, franked to 75%. At $9.30, that reflects an impressive 4.5% yield. If it's fully franked dividends that you're after however, we have a far greater idea for your portfolio…
