A trading update has revealed that Coca-Cola Amatil sales returned to growth in 4Q20, up 0.4% on the previous corresponding period, while New Zealand volumes surged by 5.2%. The positive results have led to analyst speculation that Coca-Cola European Partners’ $9 billion offer for the company may not proceed unless it lifts its offer price.

Coca-Cola European Partners made a $12.75 share offer last year, but Macquarie Capital analysts said shareholders might vote against it, since Amatil shares are currently trading at $13.12. The shares had been trading above the offer price since mid-November.

“CCEP’s indicative proposal price of $12.75 (less any second half 2020 dividends) appears low, given recent share price performance and an upbeat fourth quarter trading update,” said Macquarie analyst Morana McGarrigle.

“It raises the risk of shareholders voting against the scheme if it is not revised up.

“There is evidence that volume declines have bottomed as activity resumes in Australia and New Zealand … [Amatil] stands to benefit from any easing in social/government restrictions and will be cycling undemanding [comparable sales] into 2021.”

Citigroup’s head of research Craig Woolford agreed, noting: “Improved earnings increases the chance that CCEP will need to sweeten its offer for Amatil in our view.”

Group Managing Director Alison Watkins said: “We delivered a strong trading performance in the all-important 4Q20 Christmas period in both Australia and New Zealand. We experienced strong demand in both markets, predominantly in the Australian Grocery channel, and more broadly across most channels in New Zealand.”

In Australia, the company said the strong 4Q20 turnaround in Amatil sales reflects the lifting of COVID lockdown restrictions in Victoria in the lead up to the 2020 Christmas trading period.

“Of note during the quarter was the fact that while the on-the-go channel continued to recover in markets where COVID restrictions had eased, the ongoing (albeit less severe) restrictions on mobility and travel in the lead up to Christmas, led to increased ‘at-home’ consumption with volumes continuing to be weighted towards the Grocery channel,” Amatil said. “This in turn, resulted in the continuation of pressure on margins that was prevalent throughout FY20, although to a lesser
degree than in earlier quarters.”

From a category perspective, the Coca-Cola trademarks delivered strong volume growth, up 4.6% in 4Q20, led by demand for Coca-Cola No Sugar. Energy was another standout category with volumes up 14.9% for 4Q20 and 8% for the full year.

Watkins said: “The change in channel mix that we experienced in FY20 is best evidenced by the fact that our volumes in 4Q20 grew by 5% in the grocery channel and by 6.7% in convenience & petroleum compared to 4Q19, while our on-the-go volumes were down 8.3%. On a full-year basis we saw grocery volumes grow 4.3% and convenience & petroleum volumes up 0.4% while on-the-go was down 16.3%.”

Amatil said it expects Group FY20 EBIT to be $550.7 million. It will announce its audited FY20 financial results on February 18, 2021.