The Coca-Cola Amatil Ltd (ASX: CCL) share price rose 3.5% to $9.85 this morning after the company released its half-year results. Total revenues fell 0.1% to $2,417 million and statutory net profit after tax (NPAT) rose 13% to $158 million. However, underlying net profit after tax fell 6% to $179 million.
As underlying earnings excludes one-off impacts (positive or negative) it is likely a fairer measure of Amatil's performance over time. Underlying earnings per share fell 1.6% to 24.7 cents per share and the company declared an interim dividend of 21 cents per share, franked to 65%.
Coca-Cola Amatil ended the year with approximately $2,413 million in total debt and $852 million in cash for a net debt position of $1,561 million. Amatil also has a further $114 million in held to maturity investments (possibly long term-deposits).
Business conditions in Australia remained weak and NSW's Container Deposit Scheme (CDS) also had an impact on Coca-Cola's volumes as the CDS effectively increases the price of Amatil beverages. Trading revenue per case increased 1% overall, based on a 4.1% increase from the CDS and a 2.2% reduction in prices from Amatil as well as further impacts from changes in product mix.
Management continues to diversify Australian beverages into other categories such as energy drinks, sparkling water, and dairy (such as Barista Bros iced coffee).
New Zealand & Fiji and Indonesia & Papua New Guinea remain bright spots of the business, with strong growth in both regions continuing to be reported. New Zealand & Fiji each reported strong growth, while Papua New Guinea reported modest overall growth despite several disruptions during the year. Indonesia continues to struggle, with currency impacts, weak economic conditions, and changing consumer spending habits all impacting Amatil's performance in this region.
For the full year, management suggested that the outlook was weak, with soft market conditions in Indonesia, the uncertain impact of additional container deposit schemes coming into effect in Australia, and reinvestment in further equipment and cost savings. However, New Zealand & Fiji and the Alcohol & Coffee businesses are expected to continue growing their earnings. Amatil also announced it was considering strategic options for sale of its SPC Ardmona fruit business.
Overall it was an acceptable result from Coca-Cola and the company could be undervalued today if the Indonesia business in particular returns to strength. However, Coca-Cola will likely continue to struggle in its core business and I would find it hard to buy shares in it today without a substantial discount.
