![Coca-Cola Amatil managing director Alison Watkins says the bottler's pipeline of new fizzy drink products will stem ...](/content/dam/images/g/u/j/0/2/r/image.related.afrArticleLead.620x350.gufi0x.png/1487753356980.jpg)
Coca-Cola Amatil chief executive Alison Watkins says the bottler's pipeline of new fizzy drink products will stem falling sales in the group's biggest earning division as local consumers shun sugary drinks.
She has also said the company remains committed to vegetable and fruit packer SPC, despite taking a massive $171 million post-tax impairment in 2016.
"If I look what's in our pipeline and look what we have brought to market over the past two or three years it has been unprecedented the amount of innovation," Ms Watkins told The Australian Financial Review.
"We are going to continue to challenge ourselves and make sure that our portfolio has what the consumer today and tomorrow is looking for."
She said the carbonated soft drink category will always be an important component of the non-alcoholic ready to drink landscape. Ms Watkins pointed to smaller serving sizes, low or no-kilojoule options like Coke Zero, and cutting sugar by 25 per cent in Deep Spring flavoured mineral waters as recent product innovations.
Despite the new products the company's Australian beverages unit remained a weak spot in a slightly better than expected full-year result, in which underlying net profit lifted 6.2 per cent to $417.9 million. The result was underpinned by strong performance in the Indonesian business and alcohol and coffee division.
In a flurry of announcements running alongside the result, the Sydney-based bottler also flagged a $350 million share buyback, announced the closure of its Adelaide manufacturing plant and said chairman David Gonski would step down after 16 years in the role. Mr Gonski will be replaced by Ilana Atlas and Optus chairman Paul O'Sullivan will also join the board in March.
Overall revenue inched up 1.3 per cent to $5.3 billion for the year ended December 31. Net profit fell 37.4 per cent to $246.1 million, which included the SPC write-down.
Earnings before interest and tax in Australian beverages declined by 1.8 per cent and revenue fell 3.4 per cent due to a volumes decline of 2.1 per cent and a change in channel and category mix.
"Sparkling business clearly is under volume pressure and we are working closely with [major] shareholder Coca-Cola Company across a range of initiatives," Ms Watkins said.
Volumes in the still beverages division increased 3.1 per cent over the year, driven by water, energy and dairy segments, but the second half was affected due to challenges in the sports, tea and juice categories.
Ms Watkins said she was "committed" to SPC, while admitting it is taking longer to return to profitability than anticipated. However, the group has been lowering its costs and launching new products like ProVital and Perfect Fruit snacks.
While some analysts suggested that Pepsi gained share over the Christmas period, Ms Watkins said share "bounces around" and that its rival's recent price cuts "no doubt would have produced some gains", she was unfazed about keeping Coca-Cola Amatil's leadership position.
Alphinity Investment Management portfolio manger Bruce Smith said while the buyback was good news, it was hard to get excited when its biggest business was going backwards.
"The cash-flow performance is pretty good and the buyback gives EPS [earnings per share] growth and that's popular with some people," he said. "They had slightly better than expected results but expectations were low."
The company said a review of its supply chain had led to the decision to shutter its 54-year-old manufacturing facility in Adelaide, which will result in the loss of 180 jobs.
Ms Watkins said the decision to close the facility in 2019 was not taken lightly but reflected the problematic CBD location and dated infrastructure, and was part of a wider initiative to remodel the supply chain for the Australian beverages division.
She said the company had to modernise and invest across its supply chain to be competitive.
An additional $90 million will be invested in the company's plant in Queensland, which adds to $75 million already flagged in 2016. The capital expenditure is intended to deliver a new, expanded and automated warehouse with greater capacity.
Management is targeting a further $20 million of cost savings from 2020 and expecting related one-off costs of approximately $50 million to be offset by one-off gains.
Ms Watkins also said that given the modest size of the buyback, there was plenty of flexibility to make bolt-on aquisitions.
Based on Tuesday's closing price of $9.91 per share, the buyback equates to about 4.6 per cent of the company's capital. It said the program would not affect its existing dividend policy. Management also reiterated mid-single-digit EPS growth target.
For full coverage of today's earnings, go to the AFR Results Wrap Feb. 22