Coca-Cola (ASX:CCL) pays out dividend, but what’s the catch?

Beverage giant takes 52% hit to statutory net profit but still pays out a fully franked dividend. However, read this before you buy.

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Coca-Cola Amatil Ltd (ASX: CCL) has reported a 52% drop in statutory net profit after tax (NPAT) in its full-year results.

The company on Thursday morning revealed a $179.9 million statutory NPAT for the year ending 31 December. The big fall from $374.4 million in 2019 was attributed to impairments to its Indonesian, Fijian and Samoan arms.

“While our Indonesian business continued to face challenging trading conditions, contributed to by COVID-19 infection rates remaining high… it was able to deliver positive EBIT and a strong cash flow for the year,” said managing director Alison Watkins.

Excluding the impairments, the ongoing NPAT for 2020 of $340.3 million was still 13.6% lower compared to 2019.

Trading revenue (down 6.1%), ongoing earnings before interest, tax, depreciation and amortisation (EBITDA) (down 9%), ongoing EBIT (down 13.9%) and volume (down 4.2%) also went backwards since 2019. 

“Whilst we were able to partially offset some of the Australian EBITDA decline through our strong cost management initiatives, the lower volumes and revenue resulted in a reduced capacity to absorb fixed costs such as production, sales and support expenses,” Watkins said.

Dividend down and to be deducted from sale price

Coca-Cola Amatil announced it would pay out a dividend of 18 cents per share, which is down from 26 cents this time last year.

The business is currently the subject of a takeover from Coca-Cola European Partners PLC (NYSE: CCEP). Earlier this week the acquisition offer was increased from $12.75 to $13.50 per share.

The fully franked dividend will be deducted from the sale price for each share.

“The final dividend amount was set to allow available franking credits to be returned to Australian shareholders,” said Watkins.

Dividend ex-date Type Amount per share Franking
16.4.2021 Final 18 cents 100%
25.8.2020 Interim 9 cents 0%
25.2.2020 Final 26 cents 0%
26.2.2019 Final 26 cents 50%
27.8.2018 Interim 21 cents 65%
Table created by author

The Coca-Cola Amatil share price is flat on Thursday, nudging up just 0.04% as of mid-afternoon. Its current price of $13.38 is substantially higher than the $11.93 it was fetching one year ago.

The sale of the business to the European bottler has been approved by the Australian Foreign Investment Review Board. The transaction is still waiting for a green light from the New Zealand Overseas Investment Office.

If all goes well, the takeover will complete in early to mid-May.

Performances vary across regions

Watkins said that the South Pacific businesses will continue to suffer in the near term.

“Amatil’s trading performance in Fiji and Samoa continued to be adversely impacted by COVID-19, with expectations that both markets will remain challenged until international travel restrictions are eased.”

In Australia, the change in sales channels in 2020 reflected customers’ behaviour during the pandemic. The grocery channel was up 4.3% for the 2020 financial year and convenience and service stations also increased 0.4% — but sales “on-the-go” were down 16.4%.

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