Coca-Cola Amatil Warns of 1st Half Profit Fall Amid Australia Struggles

By Mike Cherney Features Dow Jones Newswires

The Australian bottler of Coke beverages, Coca-Cola Amatil Ltd. (CCL.AU), warned on Friday that first-half underlying net profit in 2017 would decline due to weakness in the Australian market.

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The company said trading in its Australian beverages division, its largest, so far this year had been weaker than last year. It said the unit was experiencing "volume and price pressure due to competition and category trends." Coca-Cola Amatil shares were recently down more than 6%.

Like beverage companies globally, Coca-Cola Amatil has been contending with a shift in consumer preferences away from sugary, carbonated drinks in favor of healthier alternatives. Together with major shareholder Coca-Cola Co. (KO), the Australian bottler said it is implementing strategies to deal with the structural changes but more time is needed for those efforts to gain traction.

The company also said full-year underlying net profit, before non-trading items such as cost-optimization programs and property sales, would be broadly in line with last year. It still has a medium-term target of mid single-digit earnings per share growth, however.

Other business units appeared to be faring better. The company said its New Zealand/Fiji business was in line with expectations. Its Indonesia business, a big source of growth for the company, is also meeting expectations despite being "impacted by soft market growth," the company said.

The company also said Friday it would proceed with a previously announced A$350 million on-market share buyback on April 26, subject to market conditions.

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In 2016, annual net profit fell 37% due to an impairment charge in its struggling packaged-fruit business and the challenges in Australia's drinks market. The company in March said its managing director for the Australian beverages unit would be stepping down.

-Write to Mike Cherney at mike.cherney@wsj.com

(END) Dow Jones Newswires

April 20, 2017 20:34 ET (00:34 GMT)