By Eli Greenblat
Coca-Cola Amatil boss Alison Watkins has exposed the blunders of her predecessor Terry Davis, especially in the last year of his 13-year reign, as cuts to sales staff, not visiting retail customers enough and poorly pitched promotions sparked a collapse in earnings and its flagship brands in need of repair.
Combined with skittish consumer sentiment, pricing pressure across juice, fizzy drinks and water as well as poorer earnings from its alcoholic beverages arm - which was suppose to be a key growth driver for the group - investors were warned on Wednesday to brace for earnings this year that would be ‘‘materially below’’ 2013 levels.
Ms Watkins, presenting her first earnings result since her appointment in March, provided a scathing assessment of decisions by previous management, centred around the pursuit of short-term profit targets in 2013 that were now inflicting balance sheet pain.
During a conference call with analysts after CC Amatil reported a 15.6 per cent dive in interim net profit to $182.3 million, Ms Watkins agreed with feisty Merrill Lynch analyst David Errington that the bottler had cut crucial sales staff and crunched customer visits with the apparent purpose of hitting immediate profit targets.
“That’s a fair enough observation,” Ms Watkins said in response to the analyst statement.
“We would all agree with hindsight those weren’t smart decisions.”
Sales for the beverage group were 0.5 per cent better at $2.336 billion. Pre-tax earnings at a group level were down 10.1 per cent, while its flagship Australian beverage arm witnessed a 14.1 per cent slide in earnings to $226.5 million for the first half.
Ms Watkins pledged a complete strategic review of its operations to be completed by October.
In the meantime, poor trading conditions since the federal budget and intense competition would see profits slide for the second year running in 2014-15.
The former Graincorp boss said while its Indonesian operations would continue to deliver strong volume, pricing and profits would be pinched by ongoing cost pressures in the country.
Its alcoholic beverages division, once tagged as a key growth engine, would deliver a decline in full-year earnings driven by weakness in dark spirits.
Ms Watkins promised repeatedly yesterday to foster a closer working relationship with its major shareholder, the US-based Coca Cola Company, to develop a new growth agenda and invest in its key beverage brands.
The interim dividend was hacked to 20 cents per share, down from the 24 cents per share paid to shareholders in 2013.
Shares in CC Amatil closed down 22 cents, or 2.26 per cent, at $9.52.