Value versus Volume: Not just the stock but assets as well for Coca-Cola Amatil

  • Jul 24, 2020 AEST
  • Team Kalkine
Value versus Volume: Not just the stock but assets as well for Coca-Cola Amatil


  • Coca-Cola Amatil soared above 5% on ASX with daily volume above average annual volume post releasing asset value and trading update.
  • Amatil has indicated that in the wake of adverse COVID-19 impacts, it expects non-cash impairments between $160-190 million in its 1H 2020 accounts.
  • Amatil reported substantial improvement in June trading due to relaxation in COVID-19 restrictions, though trading volumes were 9% down on pcp.
  • The high infection rate in Indonesia has particularly impacted trading volumes while rising cases in Australia also posed a substantial threat to sales.  
  • Changed consumer behaviour has shifted the Volume away from on-the-go channels which are hard-hit by the pandemic. 

The impact of rising COVID-19 infection cases leading to changed consumer behaviour can be experienced writ and large by the business players that are witnessing substantial implications of the lockdown restrictions, travel bans and social distancing requirement on their volume sales. Meanwhile, as the uncertainty around the pandemic and economy infiltrates the investor’s psychology, they seem to grow more apprehensive concerning their investment stance in the stock market. 

ALSO READ: How Has COVID-19 Impacted Brands? Are People Adopting Quality-Conscious Behaviour?

Amatil’s Asset Value Impact

Resonating the undesirable influence of COVID-19, bottler of ready-to-drink beverages, Coca- Cola Amatil (ASX: CCL) has signalled that the Company may cut asset value by up to $190 million, that has adversely impacted the trading performance of its businesses. The Company reported that it is currently assessing the value of its businesses as of 20 June 2020 and anticipates incurring post-cash pre-minorities non-cash impairments between $160-190 million in its 1H 2020 accounts. 

Amatil indicated that the outcome of impairment review remains subject to final Board approval of its 1H2020 financial statements as well as external audit review. 

Commenting on this, Group Managing Director Alison Watkins said the expected impairments are non-cash accounting adjustments while the Company stays confident concerning the long-term prospects for Indonesian business. Notably, the current impairment is concerned with the Group’s Indonesian business; however, the Company believes that it would not impact the debt facilities as they do have any financial covenant. 

ALSO READ: Beverage Industry Update: White Claw in Australia, Coca Cola Amatil Sees Signs of Improvement

Meanwhile, Amatil also reported substantial recovery and improvement in June sales volume. With the situation fluid and wavering across the different markets, the pandemic impacts continue to evolve as indicated by the Company.

Amatil believes that it has a clear path forward, which through the Group’s ample liquidity, strong balance sheet and solid credit ratings positions it well to emerge out of the pandemic effectively.  

June Trading Volumes Improve with Easing of Restrictions

The relaxation in restrictions, along with the revival in consumer sentiments, seems to be mirrored on the trading performance of Coca-Cola Amatil, witnessing improvement in trading conditions in its major markets during June.

However, compared to June 2019, the Group’s trading volume in June 2020 was down by 9%, affecting its second-quarter performance for 2020. Notably, the trading volume in 2Q2020 declined by around 23% compared to the previous corresponding period.  

Ms Watkins said the strength of the Group’s brands and their strong sales capabilities has been driving market share gains in Australia and New Zealand. Nevertheless, the spike in the cases in Victoria, leading to six-weeks of partial lockdown in Melbourne can affect the recovery of the business. Ms Watkins indicated that the Group remains conscious considering the reinstatement of Melbourne lockdown and the rising COVID-19 cases in Indonesia. 

ALSO READ: Australia’s COVID-19 Battle Continues- Melbourne Lockdown Takes A Toll On Residents

The improvement in Volumes has been encouraging for the Group as different markets have gradually lifted a substantial level of the restrictions. 

Nevertheless, the resurgence in the infection is channelising another wave of concern for the operational performance of the businesses. The relaxations in the restrictions across the different markets have overall assisted in encouraging the sales growth over April and May, which largely coincided with the imposition of strict lockdown measures.  

Gauging Impacts across different Geographies

The difference in approaches against the pandemic, timing as well as the extent to which lockdown restrictions were lifted in various geographic markets of Coca-Cola Amatil has altogether governed the improvement rate of its trading volume. 

New Zealand

The Company in New Zealand reported an increase in its June 2020 Volume, which was up by 4% compared to June 2019.

It comes as a significant improvement when measured against the Group’s volume performance in the previous two months.

Significantly, the Volume and revenue during April 2020 declined by 35% compared to April 2019, the first three weeks of May reported Volume decline by 10% compared to the previous reporting period. 

The amelioration in May refers to New Zealand moving to less stringent Level 3 COVID-19 restrictions (on 27 April) and Level 2 (on 13 May) from the strict Alert level 4. 


The Company’s June 2020 Volumes in Australia fell by 3%, including the 4% Volumes decline in non-alcoholic ready to drink (NARTD).

While, the volume movement is demonstrating an improving trend as April reported 30% downfall in NARTD volume while in the first three weeks of May 2020, volume decline was approximately 10%, compared to previous reporting period.

May trading update in Australia indicate that changing consumer behaviour owing to COVID-19 restrictions has adversely impacted margins, leading to a substantial shift in Volume. Notably, the Volume has substantially moved from Amatil’s grocery channel and away from on-the-go channels which have faced the severe impact of the restrictions.  

The downfall in people travelling and going to workplaces amidst the pandemic restrictions seems to limit the on-the-go purchases of customers, which has accentuated mainly in recent years due to the busy lifestyle of people.

ALSO READ: Shopping Habits Under Lockdown Likely to Persist Post COVID-19 Pandemic

Amatil has been keenly centred to disciplined cost management and cash flows in the current environment. Each of Amatil’s business appears to “progress in recalibrating future resourcing requirements” as per the actions required. 


COVID-19 infection rates remain particularly high during June 2020 in Indonesia, resulting in a volume decline of approximately 23% in the month this year compared to June 2019.

Nevertheless, Volume has shown substantial improvement in May 2020 and April 2020 decline rates. 

Stock Performance : Value Vs Volume

Post the significant update, CCL stock edged up by ~5.4% to $8.97 on 23 July 2020, demonstrating investor’s confidence in the improving June performance over non-cash impairments. The daily volume was noted at ~4.3 million shares as against average annual volume (as per ASX) of ~2.7 million.

Today, on 24 July, CCL traded at $8.95 (12:20 PM AEST).

Meanwhile, jittery investor’s sentiments reflected on CCL stock movement amidst the outbreak, which has dwindled by 18.6% on the Year-to-date basis. 

The Company plans on providing a detailed trading update of the first-half results which is slated for the announcement in August 2020.


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