The Coca Cola Amatil (ASX: CCL) share price is up almost 5% after giving an update for June 2020.
Coca Cola Amatil is the local Coke business for Australia, New Zealand and the South Pacific.
June 2020 trading update
Coca Cola Amatil said that it has experienced an improvement in trading conditions in its major markets in June after an easing of COVID-19 restrictions.
Trading volumes were down 9% in the month of June 2020 compared to June 2019. The June 2020 quarter showed a volume decline of 23% compared to the June 2019 quarter.
The volume performance varied across different countries. In New Zealand, June 2020 volumes were up 4%. Australian volumes were down 3%. Indonesian volumes were down 23% in June 2020, though this is still better than May and April.
Coca Cola Amatil’s profit margins, particularly in Australia, due to changing consumer preferences. The grocery channel is a lower margin channel compared to on-the-go.
Impairment
After reviewing its balance sheet items and COVID-19 impacts, Coca Cola Amatil said it expects to recognise an impairment charge of between $160 million to $190 million. This mostly relates to the Indonesian business.
However, that doesn’t mean the company is negative about Indonesia. Coca Cola Amatil Managing Director Alison Watkins said: “These expected impairments are non-cash accounting adjustments and we remain very confident about the long term prospects for our Indonesian business.”
Summary
The company continues to work on managing its costs and cashflows, but the ASX share has been disappointing over the past few years. Consumers have been slowly shifting away from sugary items and some of the power is moving into supermarket hands.
I wouldn’t want to buy Coca Cola shares today, instead I would want to choose businesses with better growth prospects or with better dividend credentials.
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