Coca-Cola Amatil Limited have released a trading update for the month of April 2020, and the first three weeks of May.
“At the time of our last COVID-19 update we noted significant volatility across channels and markets as the impacts of the pandemic started to take effect,” says Group Managing Director, Alison Watkins.
“This has continued. Since 1 April 2020, we have traded through the tighter COVID-19 lockdown restrictions, whilst simultaneously cycling the traditionally peak Easter and Ramadan trading periods. With many customers remaining closed or operating at significantly reduced capacity, there has been unprecedented disruption to trade.”
Ms Watkins says that despite the challenges, “… our business has demonstrated resilience and the ability to partially mitigate the adverse impact of the disruptions through our flexible routes to market, diverse channels, disciplined financial management and the strength of our brands.
“As the lockdown restrictions begin to ease and local economies begin protracted recovery, we are seeing signs of modest improvement in trading conditions.”
April was a challenging trading month for the Group, with the COVID-19 restrictions in full force, impacting markets throughout the peak Easter and Ramadan trading periods. As a result, Group Volume declined by approximately 33% compared to the previous corresponding period (pcp).
“While revenue since the start of April has broadly declined in line with Volume, the impact on our Group margin percentages has been much greater, reflecting marked shifts in channel and package mix, particularly in Australia,” explains Ms Watkins.
“This adverse impact has been compounded by the loss of scale in Indonesia resulting in a pronounced impact on EBIT, despite cost savings being realised through lower marketing spend and other initiatives including leave utilisation and reduced recruitment and discretionary spend.”
Throughout this period the Company has focused on partially mitigating the adverse impacts of weaker trading by maintaining its disciplined management of costs and capital expenditure, with each of its business divisions making good progress in recalibrating future resourcing requirements. It has also continued its focus on preserving its strong cashflows and ample liquidity with detailed attention to effectively managing receivables (noting the Company’s experience in this regard to date, has been encouraging). Recognising these measures and the resilience of the business, on 23 April 2020 Moody’s reaffirmed Amatil’s A3 credit rating and ‘stable’ outlook.
“We are now starting to see the gradual lifting of COVID-19 restrictions across each of our markets and with this, signs of some improvement. Trading in the first three weeks of May has seen Volume decline by approximately 26% on the pcp, an improvement on the April run rate of -33%.”
In Australia, Amatil experienced an approximately 30% decline in Volume in its Non-Alcoholic Ready to Drink (NARTD) category in April 2020 versus April 2019. This decline reflected not only the stringent COVID-19 lockdown restrictions that many On-the-Go (OTG) customers confronted but also changes in buying patterns in the Grocery channel.
OTG Volume in April was down approximately 55% on the pcp with Convenience and Petroleum Volume also down approximately 20%. In the Grocery channel, Volume declined approximately 10% versus April 2019 as panic buying abated and consumers shopped less frequently albeit with increased basket sizes. Retailers responded by reducing their inventory levels and cancelling promotional activity during the traditionally peak Easter and ANZAC Day trading periods, which resulted in reduced foot traffic and subdued consumer demand.
“As COVID-19 restrictions have started to be lifted in May, we are seeing signs of modest improvement with Volume decline rates reducing in the first three weeks of May to approximately 20% down on the pcp. To ensure we are well positioned to support customers and leverage opportunities as restrictions are eased, we have commenced repositioning team members back into the OTG channel, having temporarily redeployed them into the Grocery channel in mid-March,” says Ms Watkins.