Coca-Cola Amatil shares have posted their biggest gains in five years after the bottler unveiled plans to sell almost 30 per cent of its Indonesian business to The Coca-Cola Co for $US500 million and forecast a return to profit growth in 2015.

The Coca-Cola Co will invest $US500 million ($570 million) in Indonesia in return for a 29.4 per cent equity stake in Coca-Cola Amatil’s Indonesian business.
Coca-Cola Amatil announced the heads of agreement with The Coca-Cola Co on Thursday as managing director Alison Watkins released the outcome of a wide-ranging strategic review aimed at cutting costs and restoring sales and earnings growth while building a closer relationship with TCCC, its major shareholder and franchisor.

Ms Watkins said CCA’s profits, which have fallen for two years, were expected to return to growth in 2015.

CCA is aiming to achieve mid-single digit growth in earnings per share over the next few years and wants to pay out about 80 per cent of earnings in dividends while spending about $310 million a year in capex.
This is well below the low-double-digit profit growth achieved in eight of the last 12 years at CCA.

However, the market responded well to the news, driving up Coca-Cola Amatil’s shares by as much as 6.6 per cent to $9.25, the biggest jump since April 2010.

Ms Watkins’s guidance was in line with current market forecasts. Analysts are forecasting a 22 per cent drop in net profit this calendar year to $391 million and a 4.3 per cent rise in profit in 2015 to $408 million.
Ms Watkins also announced a flatter management structure at CCA and detailed plans to cut costs by $100 million within three years, with the savings to be reinvested in brand building and revenue management initiatives.

“We are confident that the combination of revenue and cost initiatives we have under way will restore the business to growth,” Ms Watkins said.

CCA has established a new revenue management team in its key Australian business and has flagged significant changes to its strategy, moving away from a focus on volumes and price-led revenue growth to a focus on transaction growth and revenue growth through a better mix of products and prices.

Excerpt from orignal article By Sue Mitchell – smh.com.au

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