Group managing director Alison Watkins reported at the AGM that with regard to the performance in 2015, the results were consistent with the plans and guidance provided by the company, despite difficult conditions in the two largest markets, Australia and Indonesia. The Australian Beverages Business has, however, been able to make progress in line with the strategic objectives while being able to stabilise earnings. New Zealand and Fiji reported earnings of 7% to $ 98.8 million. The strong performance across the Sparkling Beverages and water businesses. Indonesia and PNG reported an earnings growth of 9.9% despite certain headwinds because of a slowing economy, which affected volume and profitability. The Alcohol and Coffee business continued to gain momentum with earnings growth of 31.7% despite the decrease of $ 10.9 million in the Corporate Food and Services segment. Overall group reported for surge of 3.1% in trading revenue.
2015 Highlights (Source: Company Reports)
The fundamentals of the group are strong and the investment case is straightforward. The group is a Coca-Cola franchise with leading brands and a route to market providing unrivalled scale and reach with more than 270 million potential consumers in six markets. The infrastructure that supports these operations is low-cost and modern, and large-scale diversity in developed and developing markets products and categories provides steady cash flow and stability in the core Australian and New Zealand franchises which are complemented by growth opportunities and the potential for upside in the Indonesian, Alcohol and Coffee and SPC categories. The group believes steady growth at the core and accelerated growth in other businesses with a focus on cost effectiveness.
In the Sparkling Beverages category in Australia, strong growth was achieved in transactions as well as in high margin glass packs along with volume growth in core flavours brands. Highlights included the launch of Coca-Cola Life being the largest beverage launch in the country in its category, repositioning of Mount Franklin, the reformulation of Powerade and the launch of Barista Bros Double Espresso. New Zealand and Fiji witnessed strong overall category growth led by Sparkling Beverages, particularly in the home water in New Zealand and a number of new product launches. Indonesia reported an increase in volume share in Sparkling Beverages and tea, and the increased range of affordable packs. Alcohol and Coffee achieved recognition for the portfolio with more than 50 awards as well as a significant increase in coffee earnings because of channel expansion. Further steps are being taken to strengthen the category leadership position such as future development of Coca-Cola Life and the launch of Zico Coconut Water Chocolate and Smartwater.
When the group first spelt out its strategy in 2014, it was clear that the target was to return the business to mid single-digit EPS growth over the following years. In the first part of 2016, consumer demand in Australia continues to be subdued and the weak currency is taking its toll of input costs in Indonesia. However, the group intends to take another step forward in 2016 towards the EPS target. The pace of growth will depend on the successful outcome of revenue initiatives in Australia and economic factors in Indonesia. Capital expenditure will continue to be disciplined and customised to each business and the group expects to generate enough free cash flow to allow the continued targeting of a medium term dividend payout ratio in excess of 80%. The group also intends to maintain a conservative balance sheet to provide the flexibility of funding future growth opportunities and to simultaneously continue the dividend payment policy.
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