Shareholder News - Full Report - Coca-Cola Amatil

overviewIn 2011 net profit increased by 5% to $532.0 million,a strong result in a difficult trading environment.In addition, the business generated $170.3 millionin after tax profit from the agreement to sell itsshare of the Pacific Beverages joint venturewith SABMiller.The key highlights for 2011 include:• The fifth consecutive year of strong growth fromthe Indonesian and PNG business. The significantinvestments made in the region over the past fiveyears to materially increase manufacturing capacityand capability while developing a significant colddrink cooler footprint has positioned the businesswell to participate in the future growth of these tworapidly growing economies;• The successful execution of Project Zero capitalinvestment programs which continue to deliveroperational efficiencies and enhanced customerservicing capability across each of the territories.The major project – the self-manufacture of PETbottles across the Group – continues to deliverahead of target. CCA now produces some of theworld’s lightest PET beverage bottles and hasreduced the carbon footprint of every bottle bymore than 20%;• The execution of a new 10 year partnership withBeam Global has strengthened our licenced divisionand provides a key platform for the Company’s longerterm growth in alcohol;• The generation of $170.3 million in after tax profitfrom the agreement to sell the 50% share of thePacific Beverages joint venture to SABMiller;• The strong balance sheet and global brandrecognition which enabled capital markets debtrefinancing for the next two years at attractive creditmargins, materially reducing funding costs; and• The strong free cash flow generation which hassupported an 8.2% increase in full year dividendsand an increase in the dividend payout ratio to 74.9%.By investing through the cycle, we have continued tooutperform our peer group in the food and beveragessector and strengthened our market leadership positionby delivering service level improvements toour customers.review ofoperationsAustraliaThe Australian beverage businessdelivered an increase in EBIT of 2.4% to$607.2 million on trading revenue growthof 2.2%, with improved second halfrevenue growth of 2.8%. The businesscontinued to drive increased brandavailability with additional cold drinkcooler placements and deliver efficiencygains from Project Zero. Earnings wereimpacted in the first half by lower volumesas a result of the Queensland floodsand cyclone Yasi, while the second halfwas affected by constrained consumerspending, prolonged discounting by themajor competitor and cool, wet weatherin New South Wales in the immediatelead up to Christmas.New Zealand & FijiThe New Zealand business deliveredlocal currency earnings growth ofaround 3%, a very good outcomegiven the continuation of the softconsumer spending environment thathas persisted for the last two years.The business has maintained its strongmarket share position, fully recovered itscost of goods sold increases and deliveredpositive volume growth in the secondhalf. While the Rugby World Cup provideda lift in volumes, it was not enough toovercome the ongoing impact to volumesand earnings from the Christchurchearthquakes and the record rainfallwhich affected large parts of the NorthIsland in the lead up to Christmas.Indonesia & PNGThe Indonesian business hascontinued to rapidly expand its sales,manufacturing and distribution footprintacross all major population centres andnow has 32 beverage production lines,90 sales centres, around 225,000 colddrink cooler doors in the market and over8,000 employees. Local currency EBITincreased by over 20% driven by a strongRamadan selling period which saw secondhalf volumes grow by close to 9%. Thestrong volume growth in one-way-packproducts (PET bottles and aluminiumcans) and the significant benefit CCA hasreceived from reducing its cost of doingbusiness were the major contributors tothe strong performance.17.5%increase inEBIT Indonesia & PNGOne-way-pack products deliveredstrong volume growth of 15% and CCAcontinues to grow its market share in thefast growing modern food store and minimarketchannels. Inflation on food andother goods continued to be a challengefor lower income consumers resultingin lower demand for beverages inreturnable glass bottles.The PNG business also delivered anotherstrong volume and earnings result as thePNG economy continues to benefit fromincreased mining investment and highercommodity prices.Alcohol, Food & ServicesAlcohol, Food & Services earningsdeclined by 1.2% primarily as a result ofthe costs associated with SPC Ardmona(SPCA) exiting unprofitable export anddomestic private label activities. Thedecline in SPCA earnings was largelyoffset by a solid result from the Servicesdivision and the first time inclusion ofrevenue and earnings arising from thenew agreement with Beam Global madein March to sell spirits and alcoholic readyto-drinkbeverages as a principal ratherthan as an agent.The stronger Australian dollar continuesto impact SPCA’s competitiveness againstcheap imported brands and retailerprivate label categories in Australia andits earnings from international operationswith export sales declining by over 20%over the last 12 months. A highlight forthe year was the growth in the packagedfruit driven by successful promotions,strong sales in fruit snacks and newsnack products.5.0%increasein Net Profit*sale of shares inPacific BeveragesOn completion of SABMiller’s acquisitionof Foster’s Group in December 2011,CCA exercised its right to requireSABMiller to buy its total shareholdingin Pacific Beverages, its joint venturebeer operation in Australia and NewZealand, for $305.0 million. This resultedin a $170.3 million after tax profit whichwas reported as a significant gain inthe 2011 full year result.As part of the sale agreement, CCA hasthe right to acquire a number of Foster’sassets. CCA is currently conducting duediligence on the Australian non-alcoholicbeverages business and the Fijian Breweryand Fijian liquor and Fijian non-alcoholicbeverage business and, subject to duediligence and any regulatory approvals,would expect any acquisition to becompleted by mid 2012.SPC ARDMONA –RESTRUCTURE UPDATEThe first stage of packaged fruitproduction was successfully transferredfrom Mooroopna to the Shepparton sitewith the balance of production to betransferred after the completion of thefruit season by May 2012. The back officefinance function has been integrated intoCCA’s Northmead finance team and theclearance of aged stock is progressing.Overall, 37 of the 150 affected employeeshave left the business with the balance ofredundancies to be taken up in May 2012.8.2%increasein dividends Per sharePRIORITIES &OUTLOOK FOR 2012A continuing priority for 2012 is theexecution of Project Zero initiatives. Therollout of the Project Zero programme– particularly the investment in the selfmanufactureof PET bottles across theGroup – continues to support earningsgrowth and strengthen our leadershipposition. Whilst 2011 was expectedto be the peak year for spending onProject Zero, we have identified furtherattractive projects which will result incapital expenditure increasing by around$100 million to $450-470 million in 2012,with a strong pipeline of projects nowextending out to the end of 2015.The Australian business expects to beable to deliver volume and revenuegrowth in 2012. While the weakconsumer spending environment inAustralia and New Zealand remainsa concern and the persistent poorweather in NSW and Queensland hasdampened summer trading, we have asolid promotional programme in the leadup to the Olympics, with Coca-Cola akey sponsor, and we are cycling theimpacts of natural disasters and poorweather in 2011.The up-weighting of our investmentin Indonesia and PNG remains a highpriority as the growth outlook for bothbusinesses continues to be favourable.The Indonesian economy remains verybuoyant with GDP growth expected tobe over 6% in 2012 supported by positivegovernment financial reforms that areencouraging much needed investmentin infrastructure.We have made a strong startto the year in Indonesia and thebusiness continues to deliver materialimprovements in performance driven byincreased production capacity, improvedoperational capability and additionalmarketing programmes by The Coca-Cola Company. For 2012 we expect toincrease capital expenditure to $120million, which we expect by the endof the year would deliver a minimum10% increase in our one-way-packproduction capacity and a morethan 10% increase in our colddrink cooler fleet.The business expects to continue todeliver positive dividend growth toshareholders. Given the continuedstrength of the balance sheet and cashflow generation, we would expect totarget the dividend payout ratio to be atthe middle of our 70-80% target payoutlevel for 2012.Terry DavisGroup Managing Director* before significant items