By James Atkinson
Coca-Cola Amatil expects to deliver net profit growth of around 5 per cent for the second half of 2011, and has sought to provide further clarity on the sale of its share of Pacific Beverages to SABMiller.
The 5 per cent net profit increase is on a constant currency basis and before "significant items" – which include the sale of the Pacific Beverages shares – while reported net profit is expected to be lower at 4.5 per cent due to the translation impact on offshore earnings.
CCA will sell its 50 per cent interest in Pacific Beverages to SABMiller for $305 million and expects to record a profit after tax in the second half of 2011 from the deal of about $165 million after taking into account transaction, transition and other costs.
The profit will be recorded as a significant item in 2011 with the cash proceeds expected to be received during the first quarter of 2012.
CCA reaffirmed that it will be restrained from selling, distributing or manufacturing beer in Australia for two years until the end of 2013, under the terms of the sale agreement with SABMiller.
But the deal gives the company the immediate right to acquire the whole or part of the Foster's Group's Australian spirit and spirit ready-to-drink business, the Australian non-alcoholic beverages business and the Fijian Brewery and Fijian liquor and Fijian non-alcoholic beverage business at multiples ranging from 5 to 10 times EBITDA, subject to due diligence and any regulatory approvals.
"As a guide, CCA would expect to undertake due diligence during the first quarter of 2012 and preliminary expectations are for an outlay of between $100-180 million for the assets with completion of any acquisition expected by mid 2012," the company said.
CCA managing director Terry Davis reiterated that developing its alcohol business remains a core growth strategy for CCA.
"We have spent the past four years developing expertise in the manufacturing, sales and distribution of premium alcohol brands which gives us an excellent platform and knowledge base of opportunities for future growth," he said.
"We also have developed a strong and growing spirits business underpinned by our long-term relationship with Beam Global and while in the short term we cannot compete in beer in Australia, we are not restricted in other markets and we would expect to be back in the beer business in Australia in early 2014."
Davis said recent trading conditions had been difficult, but there had been an improvement in momentum since the RBA announced cuts to official interest rates with solid growth in volumes since the beginning of November.
"We still have an important two weeks of trading ahead of us, and while we have had a solid start to the Christmas season across most of Australia, cool and wet weather has affected NSW trading," he said.
Davis said the rollout of Project Zero initiatives – which include its new $60 million WA distribution centre – continues to CCA's earnings growth and it has a strong pipeline of projects extending out to at least 2015.
CCA expects to record a significant profit after tax of around $60 million for 2011 comprising the above-mentioned profit of around $165 million for the sale of shares in Pacific Beverages and around $105 million in costs associated with the restructure of SPC Ardmona.