Coca Cola Amatil (ASX: CCL) gave an update to investors today, was it a fizzer?
What is Coca Cola Amatil?
Coca Cola Amatil is the Australian distributor and rights holder to the famous Coca-Cola brand, which is ultimately owned by the US parent Coca-Cola Company (NYSE: KO). Coca-Cola Amatil started life in 1904 as British Tobacco Company. The ‘Amatil’ in its name started in 1977 when it was renamed as Allied Manufacturing and Trade Industries Limited (AMATIL).
Here’s what Coca Cola Amatil said
The beverage business gave an update for April 2020 and the first three weeks of May 2020. COVID-19 had a tough impact on the company as the restrictions fell during Easter and Ramadan. As a result, the group volume fell by approximately 33% compared to the prior corresponding period.
Overall widespread outlet closures impacted the high margin, immediate consumption channels resulting in a shift to the lower margin channels and packs.
But in the first three weeks of May, with reduced restrictions, saw a modest improvement with volumes only down around 26% on the prior corresponding period last year.
Coca Cola warned that the impact on EBIT (click here to learn what EBIT means) is pronounced despite the efforts to reduce costs. The company is reducing its capital spend by $100 million, marketing by more than $20 million and overheads by more than $120 million over the rest of 2020.
The company also withdrew its dividend payout ratio guidance and expected dividend franking levels.
The company is telling all of its businesses to focus on cashflow during this tough period.
Is it time to buy Coca Cola?
A wise strategy is to buy shares when the share price is temporarily lower. At the moment the Coca Cola Amatil share price is up 0.5%. But even before COVID-19, Coca Cola Amatil was finding it hard to consistently grow profit. There are shares in some industries that are performing strongly like Bubs (ASX: BUB) and Clover (ASX: CLV) that could be better buys for the long term.
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
