CCL - Coca-Cola Amatil

CCL is one of many companies I've decided to avoid. In CCL's case, any tax on sugar would hit their earnings and the share price.

Since the 7.50 low, price has stubbornly pushed higher (corrective pattern). The recent daily chart shows a great BO-HR setup that is perfect with a recent HL forming before the BO. I saw it and decided "no deal".

Of course price continues higher. I'm showing this chart as an example of how our personal biases can make us ignore a perfectly good setup. If price goes back to the old highs near $10.50 I'll raise an ice-cold Coke to it.

I like the chart, and I think at some point - not sure when - they will say 'we were wrong about sugar' because that's what happens to almost all research findings at some point. All findings get revised, and often replaced entirely. The only sure bet is that it will happen. Medical researchers are almost on a par with economic forecasters.

On the plus side of the ledger CCL have reduced debt and the Indo adventure is starting to pay off, larger CAPEX this year but with significant scope to fall in following years...glass half full.

12 month highs for CCL today as it punches through $9.50 to $9.525, beating the previous high of $9.50 made on 8 May.

I thought sugar laden fizzy drink was out these days? What are CCL doing right?

The Coca-Cola Amatil share price has plunged today after announcing that it is selling its loss making SPC fruit and tomato business.

https://www.smh.com.au/business/companies/spc-to-be-sold-by-coca-cola-amatil-20181130-p50jbc.html

CCL is currently down 13.37% to $8.75. Six months worth of share price gains erased in one day.

greggles said:

The Coca-Cola Amatil share price has plunged today after announcing that it is selling its loss making SPC fruit and tomato business.

https://www.smh.com.au/business/companies/spc-to-be-sold-by-coca-cola-amatil-20181130-p50jbc.html

CCL is currently down 13.37% to $8.75. Six months worth of share price gains erased in one day.

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Greg
What the chart is telling us today - opportunity or further crash ?
As a company CCL is world wide so they would not be letting it go down in Aus. But how much blood shed for that ? The current CEO is obviously not working. Ethically companies like Coco Cola only increase calories.
What do you and others eg Ann, T/A, So Cynical, Bearney, SKC say ?
Could CCL have taken the opportunity to export fruits like Costa instead of selling out ?
DNH
Cheers

Miner said:

Greg
What the chart is telling us today - opportunity or further crash ?
As a company CCL is world wide so they would not be letting it go down in Aus. But how much blood shed for that ? The current CEO is obviously not working. Ethically companies like Coco Cola only increase calories.
What do you and others eg Ann, T/A, So Cynical, Bearney, SKC say ?
Could CCL have taken the opportunity to export fruits like Costa instead of selling out ?
DNH
Cheers

Click to expand...

Hi Miner,

CCL looks like it has been in a holding/ranging pattern for the last four years. On the monthly chart, it has failed to reach the last monthly high, which is a worrying sign, as it could be heading for another leg down - possibly ~$6.

In my opinion, the chart represents the fundamentals of the company. A company currently selling outdated products and in need of transition. SPC/canned foods is a category that is not popular anymore, as can be seen in the shrinking amount of shelves in the supermarkets.

Soft drinks are also on the nose at the moment, and this is a worry for the hero product.

However, they have a great distribution network and infrastructure for getting there products on the shelf/display. But, have to spend more money on future products/drinks to transition into a modern beverage company, and to proceed to the next growth phase. Unfortunately, they are heavily reliant on the parent company in this regard.

Just my take.

sasch said:

Hi Miner,

CCL looks like it has been in a holding/ranging pattern for the last four years. On the monthly chart, it has failed to reach the last monthly high, which is a worrying sign, as it could be heading for another leg down - possibly ~$6.

In my opinion, the chart represents the fundamentals of the company. A company currently selling outdated products and in need of transition. SPC/canned foods is a category that is not popular anymore, as can be seen in the shrinking amount of shelves in the supermarkets.

Soft drinks are also on the nose at the moment, and this is a worry for the hero product.

However, they have a great distribution network and infrastructure for getting there products on the shelf/display. But, have to spend more money on future products/drinks to transition into a modern beverage company, and to proceed to the next growth phase. Unfortunately, they are heavily reliant on the parent company in this regard.

Just my take.

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Thanks Sasch
Very pertinent points. I am trying to be more forthcoming to sound on ASF for stopping me some of the hasty decisions taken in the past.
Your posting has put a right brake avoiding going into a ditch.
Have a nice weekend and thanks again.

This is a good move, there is just so much waste and pollution with plastic bottles. I would love to see Victoria put a deposit on bottles again. I used to make quite a few bob as a kid gathering up and selling the bottles. We invested in a Soda Stream at home, it is so much easier than carting home mountains of Soda water bottles and then filling my recycle bin with empty plastic bottles.
I think the heading is a bit misleading they aren't going to cut plastic use, just use recycled plastic.

Coke to cut plastic use by 16,000 tonnes

Beverage giant Coca-Cola is doubling the amount of recycled plastic it uses across its Australian beverage arm, with seven in 10 drink bottles to be made from 100 per cent recycled materials by the end of 2019.

All small packages 600ml and under, including brands such as Coca-Cola, Sprite and Fanta, will be made entirely from recycled plastic, reducing the amount of new plastic resin the company uses by an estimated 16,000 tonnes each year from 2020.More...

On November 18th CCL closed a gap dating back to April 2014 and as can be seen on the daily chart above, resistance appears to be forming support as CCL consolidates below the overhead resistance of yet another unfilled gap dating back to Feb 2014.

However, as evidenced in the weekly chart below, CCL still has some significant gaps to contend with above the current closing price of $11.38.

@rnr is that a DOS based system you are running your charts on ?

Gaps are interesting and I often think how long they are viable for?

Is the one on your daily chart 15-18 Novemeber ( 5 cents or ) more relevant than a gap in 2014 ??

I suppose it might depend on the time frame that you are working with.

Trav. said:

@rnr

Gaps are interesting and I often think how long they are viable for?

Is the one on your daily chart 15-18 Novemeber ( 5 cents or ) more relevant than a gap in 2014 ??

I suppose it might depend on the time frame that you are working with.

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Hi Trav,

I treat past gaps as a potential area of either support or resistance, obviously depending on whether price is moving up or down.
When reviewing a chart I endeavor to mark any gaps on a daily chart so that these gaps are obvious, even when switching from a daily to a weekly chart. As an example the gap down on Nov 30th 2018 from a close of $10.10 (29/11) to a close of $8.64 (30/11) included a gap down of 50¢ but does not show up on a weekly chart.
Whether I am trading off a daily chart or a weekly chart I would sooner know that info in advance.

The magnitude of the gap may obviously impact the ability of price to overcome the S or R but I don't think the gap in time has that much relevance. Observing the volume action around the time of the gap is definitely of more significance.

I must remember to congratulate @joeblow on that new auto delete function when a USER has been a bit cheeky on a post to which you are responding.

Cheers,
Rob

I was wondering how can CCL make a money with winter coming, people are conscious of calories and sugar . Interestingly I found Bell Potter and another Sydney broker have recommended CCL as a buy whereas the below article says CCL is a buy.
So confusing and my gut feeling says, CCL is a sell regardless what charts appearing.
Your thoughts please
Regards
BROKER SAYS :
coca-Cola Amatil Ltd (CCL) $8.66. Up 2.97% (please see chart attached or below).

On the 1:2 Trend Line (= 1 unit of Price to 2 units of Time)

• Double Bottom Reversal Pattern

• Peter Steidelmayer b-Formation (= Buy the Lower 1/8)

Trade Idea:

Buy the June 1 Cent Call

Mental Sell Stop Limit Below (at $8.00 or Above)


For Example – General Advice Only:
isk if sold at $8.00: ($8.66 – $8.00) x 2,500 = $1,650. More if sold below $8.00 (plus transaction costs).

================


Sell - broker 2
Coca-Cola Amatil
(CCL.AX)
Raising debt, withdrawing dividend guidance as COVID-19 impacts
18 April 2020 | 12:12PM AEST

CCL provided an update to market, post the end of peak summer trading (marked by Easter) and leading into Ramadan trading peak in Indonesia. Group volumes increased low single digits in 1Q20 but fell 30% in the first two weeks of April. Australian volumes declined 15% in April with On-The-Go (OTG) down 50%. EBIT declined mid teens percentages in 1Q20. CCL will provide another COVID-19 update at its AGM on May 26.

The outlook was modestly more adverse than anticipated in our note, Exposed to lock downs from April 6. Loss of high margin OTG sales will be a significant earnings headwind in 2020, though partly offset by forecast cost reductions of A$140mn (mostly temporary).

The telling feature of this update is the effort CCL is going to in order to bulk up its defences through increased debt funding (A$200mn raised and another A$150mn anticipated in this half), reduced capex guidance (from A$300mn to A$200mn) and withdrawal of its dividend payout ratio guidance (previously "above 80%"). CCL has a strong balance sheet with BBB+ credit rating (S&P), and we forecast this to remain the case over 2020, before improving in 2021. In our view, the preemptive fundraising highlights how unpredictable conditions are for CCL currently.

NPAT forecasts have been revised -2% in FY20 but FY21 forecasts are unchanged. GSe was 15% below consensus in FY20 into this update, so we expect a greater earnings impact to consensus forecasts. EPS of A$0.443 implies a 2020 PE of 19.5x. Our 12-month target price is at A$8.90 implying upside of +3.1%. We are Sell-rated on CCL.

Trading update shows material step down
CCL reported low single digit volume and revenue growth, EBIT was down by a mid-teens percentage for the quarter due to bushfires in Australia, additional marketing expenditure in Indonesia and impact of social distancing restrictions across various regions, with positive impacts in supermarkets unable to offset the detrimental trends in On-The-Go channels.

• Australia volumes were down 1% in 1Q20 but with mid-teens percentage impact on EBIT. Volumes were however down -15% in the first two weeks of April, mainly led by decline in OTG by -50% (GSe base case impact -55%). Alcohol volumes in the region were also down 20% due to stronger on premise declines.
  
  
• New Zealand and Fiji revenue was up low single digits and EBIT up low teen percentage in 1Q20. The first two weeks of 2Q20 however registered a 25% decline in volumes.
  
  
• Indonesia and PNG volumes were up mid single digits in 1Q20, but resulting in an EBIT loss due to increased wage and marketing costs. Trading in the first 2 weeks of April was down c.50% in Indonesia and -40% in PNG.
  
  
• COVID-19 response: Management has guided on FY20 capex target being reduced to A$200mn (vs. A$300mn earlier). Additionally, the group is also targeting cost savings of A$140mn, before the benefit of government support.
  
  
• Balance Sheet: The group has successfully placed 10-year notes of A$200mn on 6th April 2020 and is looking to raise another A$150mn. As at 31 March 2020, the group also had c.A$1.8bn of debt facilities (A$2.6bn of committed facilities) and A$920mn of cash.
  
  
• Dividend payout ratio guidance has been withdrawn.
  

Earning changes
We revise our group EBIT estimates for FY20 by -3.2% and FY21 by -0.2%. These changes are largely driven by:

• Indonesia and PNG: Sales volumes in this region has been reported to be down -50% and -40% respectively in Indonesia and PNG during the 1st two weeks of April. These declines are well ahead of our earlier expectations and we expect this to remain significant through the key Ramadan trading period. Resultantly, we revise our FY20 sales estimates by -18.5% and EBIT estimates by -35.4%, the higher impact of operating leverage being partially offset by the cost savings initiatives.
  
  
• Australia and NZ and Fiji: We revise the Australia estimates by +4.4% and New Zealand and Fiji by +0.8% for FY20 accounting for the larger-than-expected cost savings initiatives announced. However, we expect this to be largely temporary and do not forecast these cost savings to be continued in FY21 and beyond.
  

Exhibit 1 : CCL: Summary of earnings revisions

Source: Company data, Goldman Sachs Global Investment Research

Overall, we revise our NPAT forecasts by -2% in FY20 but maintain FY21 forecasts unchanged.

We also revise FY20 capital expenditure forecasts to be in line with management guidance of A$200mn due to reduced spending on discretionary projects.

Balance Sheet: Despite the significant earnings uncertainties seen for CCL in the near-term, we remain comfortable regarding the group's balance sheet position. The group has debt maturities worth A$305mn coming up for repayment in FY20 and A$310mn in FY21.

We expect dividend to be reduced to A??37 in FY20 vs. A??47 in FY19, with payout at c. 84% (despite withdrawn payout guidance of "more than 80%"). Post dividend payment, we forecast Free cashflow to be positive at c. A$74mn (inclusive of A$60mn reduction in tax due to utilisation of deferred tax assets). Lease adjusted net debt to EBITDA is forecast to increase to c. 2.7x (adjusted for the cash deposit in Indonesia and PNG) in FY20, below S&P's 3x threshold for CCL's BBB+ credit rating.

Exhibit 2 : Free cash flow post dividend obligations is expected to remain skinny in FY20

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 3 : CCL's leverage for FY20 is expected to increase to 2.7x on a lease adjusted basis, but reduce beyond that

Source: Company data, Goldman Sachs Global Investment Research

Valuation and Risks

Our fundamental valuation for CCL (85% weighting) remains based on a 50/50 weighted split of EV/EBIT-based SOTP and DCF valuation. Our FY20 EV/EBIT-based SOTP valuation is at A$7.40 (vs. A$7.50 earlier). Our DCF implies a net present value of A$10.30 (vs. A$10.10 earlier). In addition to the fundamental valuation, we include an M&A value of A$9.30 (vs. A$9.50 earlier) (15% weighting) which is based on the historic peak P/E multiple for the stock (21x). Our 12-month target price remains at A$8.90 implying upside of +3.1%. We are Sell-rated on CCL.

Exhibit 4 : Our Target Price on CCL remains unchanged at A$8.90

Source: Goldman Sachs Global Investment Research

Key upside risks are: Less competition in the grocery channel, better CSD category growth, larger than expected cost savings, and successful implementation of the 'Beverages for Life' strategy.

Andrew McLennan
+61 2 9320-1488
andrew.j.mclennan@gs.com
Goldman Sachs Australia Pty Ltd
Darshana Nair Syama
+61 2 9320-1395
darshana.nairsyama@gs.com
Goldman Sachs Australia Pty Ltd


Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

If your bearish, did you mean sell the call?

CCL has always been a disappointment for me each time ...
A go nowhere company whose only excitement comes from its name.
Never understood why it never does or did better.. maybe wrong management or falling asleep at the wheel..

qldfrog said:

CCL has always been a disappointment for me each time ...
A go nowhere company whose only excitement comes from its name.
Never understood why it never does or did better.. maybe wrong management or falling asleep at the wheel..

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People are primarily responding to a better health style with lesser sugar on daily intake.
This is winter.
The adverts for coke and peppy are not the same.

Miner said:

People are primarily responding to a better health style with lesser sugar on daily intake.
This is winter.
The adverts for coke and peppy are not the same.

Click to expand...

I would agree @Miner . CCL have taken their eye off the ball. An example.

One rarely sees cars, vans or trucks with the Coke logo all over them.

In the supermarkets people are concentrating on price per litre rather than "big buys". Admittedly they have diversified in to energy drinks and water.

I have diversified in to tap water.

gg

Miner said:

People are primarily responding to a better health style with lesser sugar on daily intake.
This is winter.
The adverts for coke and peppy are not the same.

Click to expand...

At at a stage they had a 300million market who does not get a sxit about sugar level in Indonesia and surrounding Melanesia and they blew it a big way.They should be a money printing machine but somehow lost their way; most of the pseudo healthy food in supermarket are CCL bottling, flavored water etc yet; and Coke is replaced by Gatorage...sugar branded for sport people..same sxit different branding /image
I saw a couple in their 40s on breakfast this week: lady buys water, man Gatorade, he was waking up, not back from a marathon...
I think CCL just lost their way...

I hold CCL as part of my CAM strategy and today they are in trading halt.

You can't test this in a system, but hopefully this is a positive move by the company.

"Potential material transactioninvolving the company"

Well I read that like CCL was going to buy another company, not the other way around...it is interesting how we put our own twist on a couple of words.. Unconscious Bias ?