Coca Cola Amatil (CCA) has flagged a 15 per cent decline in its first half earnings due to weakness in its Australian operations and increasing cost pressures in Indonesia.
New chief executive Alison Watkins said CCA had started a strategic review of the company’s operations to look at ways to drive growth, boost productivity and cut costs.
“Over the next few months, we will challenge and review our business plans and strategies across the group to drive growth and value while targeting a step-change in our fixed costs and productivity,” she said.
CCA now expects its earnings for the first six months of 2014 to be around 15 per cent less than the $374 million in earnings before interest and tax (before significant items) the company recorded for the same period a year ago.
Ms Watkins said CCA’s Australian beverages business had suffered due to discounting from competitors and soft sales.
“The grocery channel continues to be challenging with aggressive pricing activity which has limited CCA’s ability to recover cost increases while consumer demand in the non-grocery channel has been soft in the first quarter and there has been a mix shift to lower margin customers,” she said.
Ms Watkins said sales volumes from the company’s Indonesian business were up 10 per cent for the quarter but that was offset by a 20 per cent slide in the value of the rupiah, the country’s currency, and higher wages and fuel costs.
However, she said CCA’s SPC Ardmona division had lifted its sales 10 per cent during the quarter thanks to strong consumer support in the wake of financial assistance from the Victorian government for the struggling business.