Coca-Cola Amatil pins hopes on new drinks

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.

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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

APA Group shrugs off regulatory threat

APA Group is focusing on adding supply deals with customers despite regulatory challenges, as it looks to build on investments and an expanded asset base that yielded strong full-year profit growth.

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The gas pipeline major made a net profit of $237 million in the year to June 30, up 32 per cent on the prior year as it benefited from acquisitions in previous years.

Managing director Mick McCormack said the company is continuing the focus on growing business despite the federal government’s threat of increased regulation of the gas sector.

“We are just getting on and doing what we have always done, because that is what has got us here,” he told investors.

“We continue to do deals with customers, (consider) their energy issues (and) put up some smart energy solutions.”

The federal government this year introduced the Australian Domestic Gas Security mechanism, giving it powers to impose export controls on companies when there is a shortfall of gas supply in the domestic market.

The move followed a jump in gas prices on the east coast and warnings by the Australian Energy Market Operator of domestic gas and electricity shortages.

APA head of strategy and development Ross Gersbach slammed the threat of intervention, saying Australia had sufficient gas resources but is facing a gas price crisis because of insufficient supply and more expensive production.

“We are doing deals with customers to bring cheaper gas to market, but in the long run more supply does need to come online,” he said.

Mr Gersbach said APA understands the government’s desire to reduce energy prices, but it has resulted in numerous regulatory interventions thrust upon the industry at short notice and with limited consultation.

“There has been no increase in real terms in tariffs since 2002 notwithstanding a tripling of gas prices during that time,” he said.

“We are not the problem here.”

APA has forecasting earnings before interest, tax and depreciation of $1.47 billion to $1.51 billion in 2017/18, a modest increase from 2016/17.

Its shares gained six cents to $8.47.

APA POSTS STRONG PROFIT GROWTH

* Ful year net profit up 32pct to $236.85m

* Revenue up 11.1pct to $2.33b

* Final distribution up 0.5 cents to 23 cents

Big Bega eyes growth options, including MG

Bega Cheese boss Barry Irvin is keeping a close eye on struggling rival Murray Goulburn as he casts around for expansion opportunities for his growing and -this year – highly profitable company.

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A day after Murray Goulburn reported a $371 million loss and announced it might be a takeover target or at least an asset seller, Bega Cheese on Wednesday delivered an almost five-fold increase in full year profits to $139 million.

The result – inflated by a $124 million gain on the sale of infant formula plants during the year – came on the back of a three per cent lift in revenue to $1.23 billion and the addition of new milk suppliers lured away from Murray Goulburn.

Mr Irvin said the company was very sensitive about speculation around milk supply and the effect that has on the emotional wellbeing of farmers.

However he said Bega was now well supplied and adding capacity to higher margin products such as mozzarella and cream cheese.

“We obviously haven’t been public about how much has come over (from Murray Goulburn) but it’s substantial,” he said.

“I’ll put it this way – it’s in excess of 10 per cent of last year’s supply.”

After signing a landmark deal to buy Vegemite back from US food giant Mondelez in January, Mr Irvin said Bega was looking for new acquisitions and admitted he was watching closely as events unfolded at Murray Goulburn.

“Of course, we’re interested in assets that would enhance the business,” he said, adding that he could see merits in Murray Goulburn assets.

“Just as there were merits in us buying the Mondelez grocery business and bringing Vegemite back home.”

Mr Irvin said the company is now well positioned to respond to any corporate opportunity in dairy or food.

Bega’s sale to infant formula manufacturer Mead Johnson of a powder dryer and a factory helped eclipse 2016’s $28.8 million profit and fund the $450 million Mondelez purchase.

In June Bega announced a $160 million capital raising to fund new expansion opportunities.

Mr Irvin said the Mondelez deal would help make 2017 one of the most important in Bega’s history, saying the year would be remembered as one in which the company built its strength in dairy and moved towards creating “a great Australian food company”.

He was more modest on the ambitions for Vegemite, however.

“I have been asked whether our plan is to take Vegemite to the world; if we could convince the world to want it, of course the answer would be yes – but we’re not naive about the individual tastes of products such as Vegemite,” Mr Irvin said.

Bega shares closed one cent lower at $6.48.

NEW MILK SUPPLIES TOP UP BEGA’S BUMPER YEAR

* Net profit $138.7m v $28.8m

* Sales revenue up 2.6pct to $1.23b

* Final dividend unchanged at 5.0 cents, fully franked

Woolies winning over more customers

More customers are choosing to shop at Woolworths than Coles after the supermarket giant’s heavy food discounting and major revamp of its own brands pays off.

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Like-for-like food sales rose 6.4 per cent at Woolworths in the final three months of its 2016/17 financial year, better than market expectations of 5.7 per cent.

It was the third consecutive quarter in which Woolworths outpaced Coles in like-for-like sales growth – sales at Coles edged 0.7 per cent higher in its fourth quarter.

Woolworths chief executive Brad Banducci said the company is attracting more customers and they are now buying more each time they visit.

“The growth was on the back of more customers shopping more frequently at our stores,” he said.

“Only recently have we also seen items per basket come back.”

Woolworths spent more than $1 billion on lowering grocery prices in the past three years, and has reduced its product range, including a rebrand of its privately owned labels that Mr Banducci said was the country’s biggest ever by a retailer.

He said he was confident prices at Woolworths are competitive but he believed the public still needed some convincing.

“While we feel we are in a good place on price as of today, who knows what the future holds,” he said.

Mr Banducci also said price cuts by the supermarket giants will be more rational in the year ahead.

Woolworths expects food sales growth will not continue at the same rate as in the fourth quarter, though its like-for-like sales in the first eight weeks of the 2017/18 financial year were broadly in line with the second half of 2016/17.

The group made an underlying net profit of $1.42 billion in 2016/17, below market expectations of $1.47 billion, due to discount store Big W’s $150.5 million loss.

Mr Banducci said Big W’s performance, including a 5.8 per cent fall in sales, was “extremely disappointing”.

However, Woolworths’ $1.53 billion statutory net profit was a sharp bounce back from the previous year’s writedown-heavy $1.23 billion loss.

Analysts from investment bank Citi said the group’s core supermarkets business was strong with earnings beating forecasts but Big W remained a problem.

“We expect the market to respond favourably to the food (like-for-like sales) and margin performance in 2H17,” Citi’s team said in a note.

“Upgrades to consensus (FY18 estimated) food earnings are likely to be partly offset by downgrades to BIG W earnings.”

Shares in Woolworths rose more than one per cent in morning trade but fell throughout the day to close down 12 cents at $26.94.

SOARING GROCERY SALES DELIVER FOR WOOLWORTHS:

* Full-year profit of $1.53b, versus $1.23b loss

* Revenue up 3.7pct to $55.9b

* Final dividend up 17 cents to 50 cents, fully franked

Bigger fish means bigger profit for Tassal

Salmon farmer and marketer Tassal expects bigger fish and the premium prices that they attract, especially in export markets, will help the company achieve another record financial result in the current financial year.

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Tassal wants to grow salmon weighing five kilograms or more in 2017/18 – up from an average of 4.8 kilograms in 2016/17.

Chief executive Mark Ryan says fish will grow bigger if they are kept in the water longer in the right environmental conditions, and fed more.

“Getting more out of our fish delivers better bottom lines,” he said on Wednesday.

“Bigger fish get a better price at the end of the day.”

Tassal said it is exporting more fish because overseas markets are offering premium prices for larger fish.

With Asian demand strong, Tassal will open an export office in Shanghai in China this financial year.

Mr Ryan said the company can get its salmon to Asian markets a day earlier than the Norwegians can, and customers favour Tassal’s fish because they have a smaller head relative to body mass.

Tassal will accelerate its investment in new technology, such as moving cameras to monitor its fish and automated feeders that do not require human intervention.

The company’s net profit rose 20 per cent to $58.1 million in the year to June 30, and it said good conditions for growing fish and a shift to higher-margin wholesale markets drove the performance boost.

Tasmania-based Tassal – which owns seafood wholesaler De Costi Seafoods – said the 18 per cent increase in earnings to $114.6 million was a record result.

Mr Ryan said Tassal’s focus over the next 12 months is to grow fish biomass amid favourable environmental conditions.

“Combined with an optimised sales mix and the step change in biomass that Tassal has achieved, Tassal’s board expects to deliver another record result in FY2018,” he said.

Tassal shares gained 11 cents, or 2.9 per cent, to $3.91.

BIGGER FISH AND MORE WHOLESALING BOOSTS TASSAL:

* Full year net profit up 19.8pct to $58.1m

* Revenue up 4.5pct to $450.5m

* Final fully franked dividend of 7.5 cents, unchanged