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Coca-Cola Amatil Flags Earnings Drop as Costs Rise

Aug. 20 (Bloomberg) -- Coca-Cola Amatil Ltd. flagged a second consecutive drop in full-year earnings amid weak consumer confidence and rising costs in Indonesia. Its shares fell the most in more than two months.

Earnings before interest and tax fell 12 percent from a year earlier to A$317 million ($295 million) in the six months ended June 30, Australia’s largest beverage company said in a regulatory statement today. Net income fell 16 percent to its lowest first-half level in three years.

Declining profits add to pressure on new Managing Director Alison Watkins, who’s reviewing the company’s businesses and considering new products. She faces domestic price competition as Asahi Group Holdings Ltd. sells Pepsi as much as 33 percent cheaper than Coke. Annual net income last year hit a 21-year low due to a A$404 million writedown at its packaged-foods unit.

“Amatil needs to make considerable price investments,” to cut its differential over Pepsi, Michael Simotas, an analyst at Deutsche Bank AG in Sydney, wrote in an Aug. 6 note to clients. “The increasing negativity toward sugar and the resultant reduction in consumption remains a key concern.”

The shares declined 2.1 percent to A$9.54 at the close of trading in Sydney, the sharpest fall since June 5. The stock has slumped 21 percent this year, compared to a 5.3 percent improvement in the benchmark S&P/ASX 200 index.

Full-year earnings will be “materially below” those during the 12 months ended December, with revenue falling in its alcoholic drinks unit and competition and costs hitting its Indonesian business. The company is trying to cut A$100 million of costs over the next three years, it said today.

Low-Calorie Drinks

Sydney-based Coca-Cola Amatil will offer more low and no-calorie drinks in future as a result of a strategic review announced after Watkins took over its top job.

“As a business we have been slow to adapt to these changes in market conditions and shifting consumer trends,” she said in today’s statement.

Net income in the period was A$182 million, compared with the A$173 million average of three analysts’ estimates compiled by Bloomberg.

To contact the reporter on this story: David Fickling in Sydney at

To contact the editors responsible for this story: Stephanie Wong at Subramaniam Sharma

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