Shares of Coca-Cola Amatil Ltd (ASX: CCL) climbed as much as 8.1% this morning after the beverage manufacturing giant released the results for its half-year operations. The stock hit a high of $9.24, although it has since trended lower to sit at $8.98 around 11:15am (Sydney time).
It should be noted that the results were by no means outstanding, although they were a step in the right direction. Net profit for the period rose 0.9% to $183.9 million, with earnings per share (EPS) rising the same amount to 24.1 cents per share. This is certainly an improvement on the group's performance in recent years, although management noted that conditions still remain tough in the key Australian and Indonesian markets.
Australia
Pleasingly, volumes rose 2.8% in Australia, although revenue per unit case fell 2.2%. This was a result of an investment in pricing in order to better compete with Schweppes and win back market share with the investment funded from cost savings to be delivered in the second half.
Meanwhile, the group has successfully launched smaller 250ml cans and other 'better for you' products such as Coke Life aimed at decreasing the caloric count for the more health-conscious consumers.
Overall, the Australian division recorded a 0.5% increase in trading revenue and a a 6.1% decline in earnings before interest and tax (EBIT).
Indonesia
The company's performance in Indonesia was encouraging. Management said that it has strengthened its market position and presence, while it has also improved its in-market execution and promotional initiatives.
Revenues gained 12.4%, volumes rose 7.7% to 105.7 million unit cases and EBIT surged 46.4% to $22.4 million on an EBIT margin of 4.65% (up from 3.5% in the prior corresponding period).
Alcohol and Coffee
As part of the company's recent strategic review, Coca-Cola Amatil will now report the results from its Alcohol and Grinders coffee business together. Revenue and EBIT from this segment both grew strongly compared to the prior corresponding period, up 26.7% and 30.4% respectively, and could provide plenty of growth for the company in the future.
What happens now?
Coca-Cola Amatil still has hurdles that it needs to overcome to regain the dominance it once enjoyed in the market, but today's results certainly signalled that it is moving in the right direction. Encouragingly, management confirmed it is still targeting a return to "mid-single-digit growth" in EPS over the next few years, while it doesn't expect its earnings to fall any further, despite the challenging headwinds still facing the business.
Indeed, the company is still on track to deliver its three-year cost savings target of over $100 million per annum, with much of the 2015 savings weighted toward the second half (note that this could generate a significant improvement in net profit and earnings per share).
Coca-Cola Amatil announced a 20 cent per share dividend, franked to 75%, and could be a great pick-up for investors looking for both income and growth over the coming years.
