- Coca Cola Amatil (CCL) has revealed a dip in earnings over the first quarter of the year thanks to COVID-19
- While marginal, the company said the Black Friday bushfires and coronavirus fears caused a decline in first-quarter earnings before interest and tax
- However, sales volumes over the first two weeks of April have taken a far heavier blow
- With people staying home for Easter and Ramadan, Coca Cola said sales volumes in some regions have fallen by up to 50 per cent
- Still, Managing Director Alison Watkins said the company has a strong balance sheet and enough liquidity to comfortable weather the coronavirus storm
- Shares in Coca Cola Amatil declined over six per cent today to close worth $8.63 each
Soft drink giant Coca Cola Amatil (CCL) is the latest company to reveal some earnings drops in the face of COVID-19 woes.
The company’s struggles began with the Black Summer bushfires, which Coca Cola said impacted sales throughout January and February.
While March sales saw a sudden spike as the coronavirus pandemic sent panicked shoppers to the shelves of their local supermarkets, earnings before interest and tax (EBIT) over the month still declined slightly compared to the same time last year.
Over the full first quarter of 2020, Coca Cola said it saw a marginal increase in sales volumes, but a marginal decline in EBIT.
The company never shared specific figures but said both the volume increase and the EBIT decline were single-digit percentages.
A quiet Easter
Though March woes were muted compared to the virus’ blow to other sectors, it’s first two weeks of April likely causing the most concern for investors.
Coca Cola Group Managing Director Alison Watkins said lockdown measures over Easter and Ramadan struck a blow to sales in Australia, New Zealand, Fiji, Papua New Guinea and Indonesia.
“The first two weeks of April have included the lead up to Easter and Ramadan which are significant trading periods for our businesses,” Alison said.
“This period has been adversely impacted by the COVID-19 and government measures with many customers closed or in decline, and people staying home across all of our markets,” she explained.
As a result, sales volumes over April so far have slipped an average of 30 per cent compared to the same time last year — 15 per cent in Australia and roughly 50 per cent in Indonesia.
Strong foundations
Despite the sudden dip this month, Alison said Coca Cola has a “clear path forward” to weather the COVID-19 storm and is busy planning for the medium to long term.
“Our strong balance sheet, ample liquidity and solid credit ratings mean we are in a strong position financially and operationally not only to trade through the pandemic but to also emerge a stronger and better business,” she touted.
Still, the company has put in some cost-cutting measures in response to the coronavirus to save an extra $140 million in 2020. These measures include employee incentive reductions, recruitment freezing, and reduced market spending.
Nevertheless, Coca Cola has roughly $920 million cash in a bank deposit and $500 million in undrawn bank facilities. With the ability to shift to online sales through food aggregators, the company seems confident it will stay strong through the duration of the pandemic.
Investor response to today’s news took some of the shine off an otherwise stellar day on the market. Coca Cola shares lost 6.09 per cent today to close at $8.63 each.