Shares in the Australian based soft drink company Coca-Cola Amatil fell 11% during trading today, although they recovered a little towards the end of trading, as the company announced a disappointing sales update.

A raft of new innovations and product launches and full year estimates of double-digit net profit growth didn't help blunt the impact of a weak first quarter for sales.


"All key markets experienced soft volume in the first quarter of 2005," a statement said.

A statement continued: "Softer trading began with reduced demand in the last week of December 2004 that resulted in higher than normal inventory levels being held by CCA's customers and, when combined with cooler weather and a generally softer retail environment, impacted January and February trading. CCA is also cycling a high volume growth rate in the first half of 2004, with Australia recording volume growth of 7.5% (excluding Neverfail)."

In Australia, due to substantial increases in commodity costs, cost of goods sold have increased by 5% in 2005 and to date this increase is being recovered through higher pricing, the company said.

"CCA's major competitor did not immediately follow the supermarket price increases and there has been an impact on volume in the first quarter as a consequence of the widening price gap between CCA's brands and competitor products. CCA estimates that this increased price gap may result in broadly flat volume in first half 2005 in Australia, compared to the first half 2004," the statement said.

In Indonesia the devastation caused by the 2004 Boxing Day Tsunami and further earthquakes have led to a considerable proportion of Indonesians' disposable income being diverted to relief donations.

"Spending on discretionary goods, including CCA's products, declined in the first quarter. We expect that the impact of the lower consumption, combined with generally higher cost inflation, will offset in the first half of 2005 the benefits arising from the removal of the Luxury Goods Tax from carbonated soft drinks."

In South Korea, CCA said, trading remains impacted by high levels of household debt and continued low consumer demand.

"We have not seen any improvement in first half 2005 trading from that experienced in the second half of 2004. As such we would not expect to return to profitability in the first half of 2005. However, the initiatives being actioned by CCA (modern merchandising standards, cold drink equipment placements and the launch of Minute Maid) and the increased marketing expenditure by TCCC is expected to better position the business for the important June to August summer season.

However, CCA said it expects full year earnings growth to be weighted towards the second half due to two fewer selling days in the first half and soft volume in the first quarter.

The CCA Group expects to deliver around 10% net profit growth for the first half of 2005. It added that subject to a deterioration of current economic or trading conditions, low double digit net profit growth for the CCA Group is expected for the full year 2005.

Group managing director, Terry Davis, also announced four major sales initiatives.

The company will launch the Minute Maid's Juice range in South Korea and the Frutopia J and Fruitopia Classic in Australia during June and July, respectively.

Coke with Lime will be launched in Australia in June, while Coke with Raspberry and diet Coke with Raspberry will roll out in New Zealand also in June.