CCL Coca Cola Amatil Limited

   By Rebecca Thurlow 
 

SYDNEY--Coca-Cola Co.'s (KO) Australian distributor grew its annual profit by 45% as it cut costs and benefited from a lower interest bill after the U.S. beverage giant injected US$500 million into its Indonesian operations, allowing it to reduce debt.

Coca-Cola Amatil Ltd. (CCL.AU), 29%-owned by the Atlanta-based firm, on Wednesday reported a net profit of 393.4 million Australian dollars (US$279.6 million) for the year through December, compared to A$272.1 million a year earlier.

The Sydney-based company produces and distributes the flagship Coke brand in Australia and four neighboring countries where it goes head-to-head with PepsiCo. Inc. (PEP) in the cola drinks market. It also distributes the premium spirits portfolio of Beam Global Spirits & Wines such as Canadian Club whiskey.

Coca-Cola Amatil said it remains confident it will achieve its target, first set in 2014, of returning to mid single-digit earnings per share growth over the next few years.

After years of grappling with flat soda sales in its core Australian market, Coca-Cola Amatil has been seeking to expand its footprint in places such as Indonesia and Papua New Guinea to bolster future profits.

Coca-Cola Co. bought a 29.4% stake in Coca-Cola Amatil's Indonesian bottling operations in April. The companies are aiming to boost sales in the world's fourth-most-populous nation, expanding warehouses and adding coolers at retail outlets. However the pace of the investment rollout has been curtailed in the face of a severe slowdown in economic growth in Indonesia.

Coca-Cola Amatil's earnings before interest and tax grew by 1.4% in the full-year period, as soft drink sales remain tough in Australia--its biggest market--as consumers focus on the health issues associated with sugary drinks. Coca-Cola Amatil has been trying to attract new customers by offering different portion sizes and reduced-calorie drinks. Australian beverages Ebit rose just 0.2% to A$463.8 million.

Consumers also remain concerned about the health effects of artificial sweeteners, a factor that drove the launch of Coke Life, a naturally sweetened mid-calorie carbonated soft drink.

Market analysis cited by Macquarie ahead of the result suggests the product launch didn't boost Coca-Cola Amatil's soft drink sales, and may have cannibalised sales of existing colas. The broker said the company has been losing market share in cola to competitor Schweppes, which recently stepped up promotions of Pepsi in supermarkets, as well as private label products. Macquarie expects Coca-Cola Amatil to respond to falling volumes with increased promotions and discounting, putting pressure on margins.

The company said it will pay a final dividend of 23.5 Australian cents a share, up from 22 Australian cents a year ago.

- Write to Rebecca Thurlow at rebecca.thurlow@wsj.com

(END) Dow Jones Newswires

February 16, 2016 18:25 ET (23:25 GMT)

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