Coca-Cola Amatil says new products will boost its performance in the second half of 2017 after its half year profit dropped 29 per cent drop because of weaker soft drink and water sales.
The company launched Coca-Cola No Sugar and Keri Juice Blenders in June in a bid to lift its Australian beverages division, which has been hurt by increasing competition and discounting.
Sales volumes in the the company’s largest division in the six months to June were down 3.9 per cent from a year earlier, revenue fell 5.1 per cent and underlying earnings dropped 13 per cent.
Managing director Alison Watkins said challenges remain, but drinks sales in Australia have improved since Easter.
“We did get off to a difficult start to the year and we have seen, I would say, a steady improvement since then and a return to more normal conditions,” she said.
“A couple of very significant new product launches are really helping our momentum for the second half.”
But CMC Markets chief strategist Michael McCarthy described the outlook as grim and said the company had provided no evidence to support the idea that new products would boost second-half performance.
“While Coca-Cola is running furiously on the spot to reinvent its business the central product here remains under pressure,” Mr McCarthy told AAP.
“The reality is that over the last seven years they have tried altering their products again and again and while they have had some mild traction in some areas, particularly water, the overall impact on the business remains negative.”
“A further contraction in both revenues and profit is a real concern for Coca-Cola particular given the ongoing pressure we have seen on their operations over the last few years,” he said.
Coca-Cola Amatil shares dropped 22 cents, or 2.6 per cent, to $8.25, close to the 12 month low they fell to in July.
The company’s earnings improved in New Zealand and Fiji, Indonesia and Papua New Guinea and in its Alcohol and Coffee division, but that was unable offset its Australian division, and its half year net profit of $140.1 million was down from $198.2 million a year ago.
Coca-Cola Amatil expects its full year underlying profit to be in line with the previous year’s $418 million, a forecast that would require around four per cent growth in the second half of 2017.
It also said it was is too early to calculate the impact of the NSW container deposit scheme to be implemented in December, but said it will “challenge us over the next couple of years”.
Citi analysts said the company would need to show signs of stabilisation to its Australian beverages division in order to see its shares improve.
WEAKER DRINK SALES WEIGH ON COCA-COLA AMATIL:
* Half year net profit down 29.3pct to $140.1m
* Revenue down 3.7pct to $2.4b
* Interim dividend steady at 21 cents, partially franked