The Motley Fool

Coca-Cola Amatil share price sinks after COVID-19 sales collapse

The Coca-Cola Amatil Ltd (ASX: CCL) share price is sinking lower following the release of an update this morning.

At the time of writing the beverage company’s shares are down 5% to $8.74.

What was in Coca-Cola Amatil’s update?

Coca-Cola Amatil has released a comprehensive update on current trading conditions and its response to the coronavirus pandemic.

The company’s managing director, Alison Watkins, described the first quarter as “unusual”.

She said: “Our first quarter of 2020 was highly unusual. We faced the challenges of the Australian bushfires in January and February and in March the adverse impacts of the COVID-19 pandemic started to take effect.”

During the quarter the company delivered low single digit percentage Volume and Revenue growth compared to the prior corresponding period.

However, its Earnings Before Interest and Tax (EBIT) was down by mid teens percentage.

This reflects the impact of the bushfires in January and February, planned additional marketing expenditure, and margin erosion as a result of changes in channel mix due to social distancing restrictions.

Unfortunately, its performance has weakened materially since the end of the first quarter.

“The first two weeks of April have included the lead up to Easter and Ramadan which are significant trading periods for our businesses. This period has been adversely impacted by the COVID-19 and government measures with many customers closed or in decline, and people staying at home across all of our markets.”

“As a result, our Volumes have reduced by approximately 30% on the prior corresponding period, with Indonesia down close to 50% and Australia down approximately 15%,” the managing director added.

Can Coca-Cola withstand these tough trading conditions?

Ms Watkins believes Coca-Cola Amatil is well-placed to navigate the tough trading conditions it is experiencing.

She said: “We entered this crisis with a resilient business model and strong foundations that have enabled us to withstand the immediate challenges presented by the pandemic.”

The managing director notes that at the end of March its total debt was approximately $1.8 billion, with committed debt facilities totalling $2.6 billion and an average maturity of 5.4 years.

The company had approximately $500 million of committed undrawn bank facilities available and $920 million in cash that it holds on bank deposit. It believes this provides it with financial flexibility in the current uncertain environment.

Since then Coca-Cola Amatil has successfully completed a $200 million 10-year European Medium Note placement. These funds were received and placed on bank deposit on April 15.

Ms Watkins concluded, “The COVID-19 impacts are continuing to evolve with the situation fluid across all of our markets. We are experiencing large volatility in volumes across markets and channels making it premature to draw any conclusions about the trading impact of the pandemic at this stage. We will have a clearer view at our Annual General Meeting in May.”

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...

Latest posts by James Mickleboro (see all)