Profits: Coca Cola Amatil, Woodside Have Good 2011s, Confident About 2012.

February 23rd 2012 – Australasian Investment Review – (AIR)

Coca-Cola Amatil has shrugged off weak demand and the cool weather across much of the country and says its key Australian business being able to deliver volume and revenue growth this year after a slow year in 2011.

That’s after the group yesterday reported a 19% rise in 2011′s net profit to $591.8 million from the $497.3 million earned in 2010.

That result included nearly $60 million in one off gains, and excluding that earnings rose a more sedate 5% to $532 million, close to analyst forecasts for $536 million.

The company declared a final dividend of 30.5 cents per share, fully franked, up 8.9%, making a total of 55c for the full year, a rise of just over 8% on 2010.

Trading revenue lifted 6.9% to $4.8 billion.

Earnings before interest and tax increased by 2.8% to $868.9 million, before significant items, with trading revenue growth of 6.9% benefiting from first time inclusion of revenue from sales of the Beam spirits and alcoholic ready-to-drink portfolio.

Despite ticking the right boxes (especially with a solid start to the year in Indonesia, its fastest growing market), the shares weakened in yesterday’s generally down day for the local market.

They ended down half a per cent or 5c at $12.06, despite the confidence about this year, especially in Indonesia, which is assuming greater importance for the company.

CCA CEO Terry Davis said yesterday the result was a strong one in a tough trading environment.

“I believe that to deliver five per cent growth in net profit to $532.0 million, as well as $170.3 million in after-tax profit from the Pacific Beverages transaction, in what was undoubtedly the most challenging year the business has faced in over a decade, is a credit to the strength of our business model,” Mr Davis said in yesterday’s statement.

“By investing through the cycle, we have continued to outperform our peer group in the food and beverages sector, and strengthened our market leadership position by delivering service level improvements to our customers.”

The significant gain of $59.8 million comprised $170.3 million in after-tax profit from the agreement to sell CCA’s 50% share of the Pacific Beverages brewing joint-venture to SABMiller in December 2011, which more than offset the $110.5 million in restructuring and associated costs for the SPC Ardmona food business.

Coca-Cola Amatil says it is further boosting of its investments in Indonesia and Papua New Guinea will be a high priority in 2012.

Looking to 2012, Mr Davis said its businesses in Indonesia and Papua New Guinea had generated strong growth in earnings, boosted by increased manufacturing capability and the distribution of more cold drink coolers.

“The up-weighting of our investment in Indonesia and PNG remains a high priority as the growth outlook for both businesses continues to be favourable,’’ Mr Davis said.

“The Indonesian economy remains very buoyant with GDP (gross domestic product) growth expected to be over six per cent in 2012, supported by positive government financial reforms that are encouraging much-needed investment in infrastructure.”

“We have made a strong start to the year in Indonesia and the business continues to deliver material improvements in performance driven by increased production capacity, improved operational capability and additional marketing programmes by The Coca-Cola Company.

Mr Davis said he expects the company’s Australian business to be able to deliver volume and revenue growth in 2012.

“While the weak consumer spending environment in Australia and New Zealand remains a concern and the persistent poor weather in NSW and Queensland has dampened summer trading, we have a solid promotional programme in the lead up to the Olympics, with Coca-Cola a key sponsor, and we are cycling the impacts of natural disasters and poor weather in 2011.”

“For 2012 we expect to increase capital expenditure to $120 million, which we expect by the end of the year would deliver a minimum 10% increase in our one-way-pack production capacity and a more than 10% increase in our cold drink cooler fleet.”

The business expects to continue to deliver positive dividend growth to shareholders. “Given the continued strength of the balance sheet and cash flow generation, we would expect to target the dividend payout ratio to be at the middle of our 70-80% target payout level for 2012,” he said.

A first half trading update will be provided at the Company’s Annual General Meeting on May 15.

Even though Woodside experienced a sharp rise in revenue in 2011 from higher oil prices, higher costs associated with the Pluto LNG project saw the group report a 4% fall in profit after one off items yesterday.

Net profit for the year came in at $US1.507 billion, the company reported yesterday.

Woodside said it suffered from $US165 million in extra costs from delays at the Pluto liquefied natural gas project on WA’s Burrup peninsula.

Woodside, however, is sticking by its schedule for the $15 billion project, expecting to ship its first LNG cargo next month.

Woodside shares jumped 2.5% or 91c to $36.86 because of the news the Pluto project remains on the latest timetable and there were no more delays.

As well firming global oil prices also helped the shares higher.

The shares are up 16% so far this year, more than four times the increase in the market, thanks to the rising price of oil and strong demand for LNG from Japan.

Profit before one off items like the higher Pluto costs was $US1.655 billion in 2011, up 17% from $US1.418 billion in 2010 and a better indication of the impact of those higher oil prices.

Woodside upgraded its contingent resources by 17.8% to 2.1365 billion barrels of oil equivalent (MMboe), primarily because of positive revisions in the Browse gas field.

Woodside’s full-year sales rose 14.5% to $4.8 billion as a result of those higher oil and gas prices.

Production fell 11% to 65 mmboe, mainly because of natural declines in existing fields.

The company forecast 2012 production of 73 to 81 mmboe, with 17 to 21 mmboe expected to come from Pluto once it is completed.

Woodside is 24% owned by Royal Dutch Shell, which has indicated that stake will be sold in the near future as Shell concentrates on being a direct LNG producer and not a producer and investor.

Woodside has three multi-billion dollar LNG projects it wants to develop and is considering selling down part of its 50% stake in the Browse LNG project to cut its share of the costs.

It says it could make acquisitions with the money it raises, as well as spending on the other projects.

An unchanged 55 US cent final dividend was declared, taking the full year payout to a record $US1.10 share, up from $US1.05 in 2010.

The AGM will be held in Perth on May 2.

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