Australia refused to give a A$25 million ($21.8 million) grant to local fruit processor SPC Ardmona Ltd. saying parent Coca-Cola Amatil Ltd. was capable of restructuring the company without government support.
Coca-Cola Amatil is a “very, very strong business,” Prime Minister Tony Abbott told reporters in Canberra today after his Cabinet decided to turn down the request for aid. “This is a business which well and truly has the resources to ensure that SPC Ardmona is in a strong position to restructure.”
Abbott’s government, elected in September vowing to cut taxes and ease red tape for businesses, has said it doesn’t believe in “corporate welfare” to prop up ailing companies. Coca-Cola Amatil had applied for temporary tariff protection to stop imported packaged fruit being dumped into Australia and sought a government grant to support a restructuring of the unit’s operations.
Coca-Cola Amatil, which had pledged to invest A$90 million in the unit contingent on the grant being approved, said the decision meant a further A$25 million in aid from Victoria state wouldn’t go ahead.
The company will undertake a review of the unit’s carrying value and a write down of its assets, with details to be announced at its full-year results on Feb. 18, it said in a regulatory statement today.
Shares in Coca-Cola Amatil declined 11 percent last year, compared with a 15 percent gain for the benchmark S&P/ASX 200 Index. The announcement came after the market closed in Sydney, and the stock ended down 0.9 percent at A$11.79.
The Sydney-based company said in a November trading update it expected earnings before interest and tax in the year ending Dec. 31 to be as much as 7 percent lower than the previous year, before significant items. Net income fell 12 percent to A$216 million in the six months through June, Coca-Cola Amatil reported Aug. 20.
SPC Ardmona has produced and canned tomatoes, stone fruit and vegetables in Australia’s southeast for more than 90 years, according to its website.