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

Victorian renewable energy boost to be law

Fed up with waiting for a national renewable energy target, Victoria is going it alone.

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Legislation to lock in Victoria’s renewable targets at 25 per cent by 2020 and 40 per cent by 2025 was introduced into parliament on Wednesday.

“What we know is in the absence of policy certainty and leadership from Canberra, it’s up to states like Victoria to fill that void, to make sure that we’re doing everything we can to drive the transition that is incredibly important,” Premier Daniel Andrews told reporters.

Energy Minister Lily D’Ambrosio called the targets “ambitious yet achievable”.

“This is the policy certainties and the right policy that industry have been deeply searching for to make sure they can make the right decisions to invest,” she told reporters.

To further encourage investment, a renewable energy auction will be opened to industry to compete to build sources producing up to 650MW – enough to power 389,000 households.

The first auctions open in October and are forecast to bring forward $1.3 billion in investment.

Tenders have been awarded to build two new solar farms in the Sunraysia district and near Shepparton that will provide 138MW to power Melbourne’s tram network.

The government says modelling shows bringing in more renewables will cut power costs by about $30 a year for households, $2500 for medium businesses and $140,000 for large companies, by 2034-35.

The savings are based on scenarios “chosen by the Victorian government”.

The future of coal is not mentioned in the plan, but Ms D’Ambrosio told reporters it would play a role “for many years to come.”

During parliamentary question time Opposition Leader Matthew Guy said the government could only achieve its 2020 target with the closure of Hazelwood and asked if Yallourn W or Loy Yang A would close to meet the 40 per cent target.

“The simple answer is no, you are absolutely wrong,” Ms D’Ambrosio replied.

Mr Guy later told reporters energy reform was needed immediately to ease the financial pressure on consumers.

However he also said the Victoria should wait for a federal target because a state-based one would put it at a competitive disadvantage.

“It appears to be political vanity at great expense to consumers,” he said.

Sirtex shares drop on $26 million loss

Shares in liver cancer treatment developer Sirtex Medical have plunged after it ended a challenging year with a $26.

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3 million loss.

Sirtex said a previously announced $90.5 million writedown in the value of its clinical and research and development assets led to the loss, along with restructuring costs.

Excluding those one-off items, slowing sales growth contributed to a 21 per cent drop in underlying profit to $42.4 million in the 12 months to June 30 – the first fall since 2010/11.

Sirtex said it had a 5.4 per cent lift in global sales of doses of its core technology, a radiation therapy for liver cancer.

However sales growth in its largest market of America slowed to 4.6 per cent.

The company says referrals for the technology declined as competition for patients increased, including from drug-based therapies.

Sirtex also spent $4.1 million on restructuring the business in 2016/17, mostly on redundancies.

The company said it is committed to improving its market share and has cut costs to improve its financial performance, but some challenges may continue.

“We do anticipate the market conditions that manifested in FY17 may persist through FY18,” Sirtex said in a statement.

“Though the resetting of the business means we are now better positioned and more focussed on growing our core SIR-Spheres microspheres business.”

Sirtex shares dropped $1.70, or 10.5 per cent, to $14.56.

IMPAIRMENTS HIT SIRTEX AS SALES GROWTH SLOWS:

* Full-year loss of $26.3 million vs $53.6m profit

* Revenue up 0.9pct at $236.9m

* Final unfranked dividend 30 cents, unchanged

Higher IAG car claims push premiums higher

IAG will use higher motor insurance premiums to address the increased cost of claims that pushed down its full-year underlying insurance margin.

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The insurance giant lifted profit for the 12 months to June 30 by 48.6 per cent to $929 million after changes to compulsory third party insurance in NSW allowed higher than expected prior period reserve releases of $457 million.

That more than offset a rise in natural peril claims due to events including the Kaikoura earthquake in New Zealand and tropical Cyclone Debbie in Queensland.

But underlying insurance margin – IAG’s preferred measure of performance – fell from 14 per cent to 11.9 per cent partly due to higher motor claim costs in Australia and New Zealand, the insurer said on Wednesday.

IAG has already raised premiums to address the issue – helping lift gross written premium 3.9 per cent to $11.8 billion – and said the 2018 financial year should show further results of “ongoing rate initiatives to help address short tail claim pressures, notably in motor”.

Chief executive Peter Harmer said the plan was well advanced.

“We have a number of initiatives underway that look at how we can reduce the cost of managing claims in a way that creates affordable insurance options for customers both now and into the future,” Mr Harmer said.

“We expect these initiatives, which are being created in consultation with our customers, to be finalised in the first half of the 2018 financial year.”

Net natural peril claim costs rose to $822 million, which was up 24.7 per cent on 2016 and more than $140 million over allowance.

Investors were unimpressed, sending IAG shares down 54 cents, or eight per cent, to $6.22.

CAR CLAIMS CRASH IAG’S FULL-YEAR FINANCIALS

* Net profit up 48.6pct to $929m

* Gross written premium up 3.9pct to $11.8b

* Underlying insurance margin 11.9pct v 14.0pct

* Final dividend up seven cents to 20 cents, fully franked.

North Korea presses rocket program

North Korean leader Kim Jong Un has ordered the production of more solid-fuel rocket engines as he pursues nuclear and missile programs amid a standoff with Washington, but there were signs of the drama easing.

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The report carried by the KCNA news agency lacked the traditionally robust threats against the United States after weeks of heightened tension, and US President Donald Trump expressed optimism about a possible improvement in relations.

“I respect the fact that he is starting to respect us,” Trump said of Kim at a raucous campaign rally in Phoenix, Arizona.

“And maybe – probably not, but maybe – something positive can come about.”

The KCNA report, about Kim’s visit to a chemical institute, came not long after US Secretary of State Rex Tillerson appeared to make a peace overture, welcoming what he called the recent restraint shown by the reclusive North.

Kim was briefed about the process of manufacturing intercontinental ballistic missile (ICBM) warhead tips and solid-fuel rocket engines during his tour of the Chemical Material Institute of the Academy of Defence Science, KCNA said.

“He instructed the institute to produce more solid-fuel rocket engines and rocket warhead tips by further expanding engine production process and the production capacity of rocket warhead tips and engine jets by carbon/carbon compound material,” KCNA said.

North Korea has conducted two nuclear tests and dozens of missile tests since the start of last year, significantly raising tensions on the heavily militarised Korean peninsula and in defiance of UN Security Council resolutions. Two ICBM tests in July resulted in a new round of tougher global sanctions.

The last missile test on July 28 put the US mainland in range, prompting heated exchanges that raised fears of a new conflict on the peninsula.

Tillerson, however, noted what he called the restraint the North had shown and said he hoped a path could be opening for dialogue.

South Korea and the United States are conducting an annual joint drill this week involving computer simulations of a possible war, exercises that the North routinely describes as preparation for invasion. The drills started on Monday and run through to August 31.

The KCNA report said Kim had given “special thanks and special bonus” to officials of the institute, calling them heroes. A photograph showed Kim in a grey pinstriped suit, smiling before a large flow chart that described some kind of manufacturing process.

There was none of the fiery rhetoric of recent weeks, when Kim threatened to fire missiles into the sea near the US Pacific territory of Guam after Trump warned North Korea it would face “fire and fury” if it threatened the United States.

UNSW leads quantum computer project

Another Sydney university has joined the international race to develop the world’s first quantum computer.

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The University of NSW is the latest contender in what’s been called the space race of the 21st century after it launched Silicon Quantum Computing on Wednesday.

UNSW has partnered with Telstra and the Commonwealth Bank in the $83 million venture which will use technology developed at the university over the past two decades to build quantum computing hardware.

The University of Sydney in July revealed it had partnered with Microsoft to try and develop the world’s first quantum computer.

Quantum computers promise to deliver a massive increase in processing power over conventional computers by using a single electron or nucleus of an atom as the basic processing unit – a quantum bit, or qubit.

By performing multiple calculations simultaneously, quantum computers could be used to complete fast database searches, optimise traffic data and in artificial intelligence.

UNSW has received $8.7 million and $25 million boosts from the state and federal governments respectively to help create a prototype by 2022.

“It’s an exciting time to invest in this new industry that will shape the 21st century,” UNSW physics professor Michelle Simmons said in a statement on Wednesday.

Within the next five years, Silicon Quantum Computing will put together all the components of a quantum computer into a chip which will fast-track its ability to create a full-scale quantum computer, Telstra’s chief scientist Hugh Bradlow told AAP.

“UNSW is a world leader in this technology,” he said.

Skills Minister John Barilaro says this launch ensures NSW is a global leader in the space race.

“This new company, led by UNSW, will help to ensure we remain global leaders in the race to develop a silicon based quantum computer,” Skills Minister John Barilaro said in a statement on Wednesday.

The hardware will be built at the UNSW Sydney Kensington campus and at the University of Melbourne by a team of postdoctoral researchers, PhD students and lab technicians.