Coca Cola targets savings

COCA Cola Amatil has signalled $140 million in savings through several measures to weather the coronavirus.

The beverage giant yesterday said it had implemented cost management programs including “significant” reduction in incentives, recruitment freezes, reduced marketing expenditure and minimising discretionary spend.

The company also said noncritical projects had been deferred, reducing capital expenditure for FY2020 from $300 million to $200 million.

Coca Cola Amatil managing director Alison Watkins (right) said the board had decided to temporarily withdraw the group’s dividend payout ratio guidance. She said this would provide the group with additional flexibility to address any future headwinds or further adverse economic conditions arising from the pandemic.

The company will make a decision on the 2020 dividend at the time of the 1H2020 financial results. Ms Watkins said Coca Cola Amatil’s debt at March 31 was about $1.8 billion, with committed debt facilities totalling $2.6 billion at an average maturity of 5.4 years.

The group has approximately $500 million of committed bank facilities available and $920 million in cash that it holds on bank deposit, providing financial flexibility in the current uncertain environment.

“We have ample liquidity to serve debt maturities of around $305 million which will be due for repayment in 2020, with additional flexibility to pursue strategic opportunities that arise,” Ms Watkins said.

However, Ms Watkins said the first quarter of 2020 was “highly unusual”, given the double-impact of the Australian bushfires and the adverse impacts of the coronavirus.

The group delivered low single-digit percentage volume and revenue growth in 1Q2020 compared to 1Q2019, driven primarily by its Indonesian business. Earnings, however, were down by midteens percentage for the quarter on the prior corresponding period.

The company said this reflected the impact of the bushfires in January and February, planned additional marketing expenditure in Indonesia and margin erosion as a result of changes in channel mix in March when social distancing restrictions were introduced.

Ms Watkins said in March 2020 the group experienced mid single-digit percentage volume growth versus March 2019 as consumers engaged in stockpiling.