CCA has seen margin pressure in Australia

CCA has seen margin pressure in Australia

Coca-Cola Amatil has tasked its new CEO with a strategic review as she warned first-half underlying operating profits are to drop by 15%.

Alison Watkins, who joined CCA six weeks ago, said she has already identified “a number of immediate challenges” particularly in Australia, where aggressive pricing has cut into margins. Cost inflations in Indonesia because of a 20% currency depreciation has further damaged CCA's overall business.

“At this early stage of the year, expectations would be for challenging trading conditions to continue,” Watkins said.

CCA's share price on the Sydney exchange dropped by 15% in the wake of Watkins' profits warning.

The CEO said the review will target “a step-change in our fixed costs and productivity”.

CCA's problems are ongoing, with full-year results released in February highlighting “difficult trading conditions” in the Australian grocery channel leading to a 9% drop in beverage profits in its domestic market. The company was also hit by a major write-down for its canned fruit and vegetable unit.

There was good news for the company last year when it re-entered the Australian beer and cider market and announced a number of new distribution tie-ups with Molson Coors and Swedish cider Rekorderlig.