Analysis of Annual Report of Coca-Cola Amatil 2017

This report provides an analysis of the annual report of Coca-Cola Amatil for the year 2017, including information about the company's board of directors, investment and financing decisions, corporate governance recommendations, auditor independence, and measures taken to ensure ethics in business operations.

Accounting And Financial Management
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Contents
Introduction.................................................................................................................................................3
Brief summary of company.........................................................................................................................3
Information about the board of directors...................................................................................................4
Characteristics of board...............................................................................................................................6
Important investment or financing decisions made by Coca Cola Amatil Ltd..............................................7
Key corporate governance recommendations of ASX Corporate Governance Council...............................7
Information about the auditor and its independence.................................................................................8
Measures taken by Coca Cola Amatil Ltd to ensure ethics in its business operations.................................9
Top five investors of Coco Cola Amatil and their importance......................................................................9
Analysis of financial statements for year 2017..........................................................................................10
Liquidity Analysis...................................................................................................................................12
Efficiency Analysis..................................................................................................................................12
Leverage Analysis..................................................................................................................................13
Profitability Analysis..............................................................................................................................13
Market Ratios........................................................................................................................................13
Cash flow management.........................................................................................................................14
Overall Performance and Financial Status.............................................................................................14
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15
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Introduction
The present report is developed for undertaking an analysis of annual report of Coca-Cola
Amatil of the year 2017, one of the largest bottlers of non-alcoholic ready to drink beverages
within Asia Pacific region. The analysis is carried out by examining the internal as well as
external performance of the company to determine the potential of its future growth and
development. As such, the report primarily provides a brief summary of the company including
the details about its industry sector, primary activities and recent performance. This is followed
by providing details about the company’s board of directors such as their education, experience,
remuneration, composition, expertise and other such characteristics. It then presents a discussion
relating to the investment or financing decisions made by Coco Coal Amatil Ltd during the
financial year 2017. This is followed by examining the policies of corporate conduct by the
company as per the Australian Stock Exchange (ASX) Corporate Governance Council (CGC). It
is followed by examining the audit firm of the company and the declaration of the auditor in
relation to the accounting information and its independence. The key measures that are adopted
by the Coca-Cola Amatil Ltd for ensuring that its business operations are carried out as per ethics
judgments have also been examined within the report. The top five investors of the company and
analysis of its financial statements is thereby undertaken to examine its financial performance
through examining the financial ratios such as liquidity, efficiency, leverage profitability, market
values and cash flow management.
Brief summary of company
Coco-Cola Amatil is regarded to be one of the largest bottlers and distributors of non-
alcoholic ready to drink beverages in the Asia pacific region. It is regarded to be one of the major
bottlers of Coca-Cola and carries out its operations mainly in the five countries, that are,
Australia, New Zealand, Indonesia, Fiji, Guinea and Samoa. The diverse portfolio of products of
the company includes carbonated soft drinks, spring water, sports and energy drinks, fruit juices,
flavored milk and packaged ready to eat fruit and vegetable snacks and products. The company
operates in the beverage sector and has the presence of diverse workforce for serving its millions
of customers (Coca-Cola Amatil, 2017). The company has delivered strong financial
performance in the year 2017 with growth in its net profitability as compared with the financial
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year 2016. The company has recorded growth in the underlying earnings per share by about 2.2
per cent and 85.7 per cent on a statutory basis. Also, the total dividends paid to the shareholders
have increased by about 2.2 per cent in the financial year 2017. However, the company has also
recorded a net increase in its capital expenditure to about $312.2 m as compared with $295.7 m
in the financial year 2016. Also, its trading revenue has recorded a decline of about $4.93 billion
in the year 2016 as compared with that of the year 2017 (Coca-Cola Amatil: Annual Report,
2017).
Information about the board of directors
Board of Directors details
Director’s
Name
Gender
and Age Education and Career history Remuneration details
Ilana Atlas Female
and age
62
She has done Masters of laws from
University of Sydney and Bachelor
of Jurisprudence (Honours) &
Bachelor of Laws (Honours) from
University of Western Australia.
Mrs. Atlas has great experience in
business field and she had serve as
executive as well as non-executive
director in many industry sectors.
She has worked in Westpac Banking
Corporation from year 2003 to 2010
as senior executive. For more than
22 years she has practiced as the
lawyer and also remained the
managing partner in Mallesons
Stephen Jaques. She has also been
listed on company board as director
in OneMarket Limited and ANZ
Bank.
She has $408,371 as the
remuneration fees for
year 2017 in which
$19832 has been
included for
superannuation amount.
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Alison Watkins Female
and Age
is 53
She has taken degree in bachelor of
commerce from university of
Tasmania and hold fellow degree as
Chartered Accountants Australia and
New Zealand. Hold Position as
senior fellow member in financial
services Institute of Australia. She
has joined Coca Cola Amatil in
march, 2014 as Group managing
director and before this Ms Watkins
was managing director at GrainCorp
Limited.
She holds the position
of executive director
and group managing
director and draws
maximum part of
remuneration paid to
executive directors.
Total remuneration paid
to Watkins is equal to
$5,112,759, which
includes 2180168 as the
basic salary, 19,832 as
superannuation and
other performance based
payments.
Catherine
Brenner
Female
and age
45
She has degree of bachelor of
Economics (Macquarie University)
and Master if Business
Administration from Australian
Graduate school of Management.
Currently she is non executive
director and she is member of Audit
& Finance Committee and important
committees within the company. She
also holds position of non-executive
director at Boral Limited.
She has $254,388 as the
remuneration fees for
year 2017 in which
$19832 has been
included for
superannuation amount.
Mark Johnson Male and
age 58
He has degree of bachelor of arts
(Business administration) and also
taken degree in masters in
management from university of Tec
De Monterrey Mexico. Also held
He has drawn
remuneration of
$238607 in year 2017
which included 20,137
as the part of
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masters degree in business
management for executives from the
University of Texas, USA. Mr.
Garduno represents as the president
and representative director of Coca-
Cola Japan. In addition to this he has
been in leadership role in Coco
Cola Company in Latin America,
Europe and Asia.
superannuation.
Note: Some of former directors have been excluded from the list and few directors that have least
participation have been not included
(Coca-Cola Amatil: Annual Report, 2017).
Characteristics of board
The information about the board characteristics and functioning will be found in
corporate governance statement of the company. Members at the board has been appointed or
approved by the stakeholders and they directly report to them for the matters related to strategic
initiatives and value creation. Managing director and chief executive director has not been
appointed by the stakeholders as they are appointed by all board members. The board delegates
strategy to the management of Coca Cola Amatil and they are also responsible for ensuring
company make compliance with all the corporate governance guidelines. Board at Coca Cola
functions with the help of five main committees and they are related party committee, people
committee, nominations committee, audit & finance committee, and lastly risk & sustainability
committee. In addition to this board of directors take independent assurance from internal audit,
external auditors and legal & professional advisors. There is detailed charter defined under
corporate governance framework of Coca Cola Amatil that defines the roles and responsibilities
of each of board committee. Chairman of the board is chosen from the list of non-executive
directors and each of the non-executive directors to at least of one of the board committee. In
nomination committee all the non-executive directors have equal participation (Coca-Cola
Amatil, 2017).
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Important investment or financing decisions made by Coca Cola Amatil
Ltd
The company has recorded an increase in the capital expenditure in the year 2017 due to
investment incurred in the construction of a new glass bottling line and additional capacity of
daily and juice products. Also, it has incurred heavy investment on expenditure its distribution
network within Fiji through opening new outlets. It has also incurred investment in development
of additional production line as a part of its three-year capital expenditure program. It is seeking
additional investment to foster growth in the beverage products by planning of launch of new
products supported by development of marketing and advertising program. A significant
investment is also incurred in the development of tea, juice, dairy and water products for catering
to the potential opportunities within the market. The investment is also incurred within the $100
million investment program launched by the company for modernizing the business and
restructuring the product portfolio and adding the fruit-based snacking products in its product
line. The capital expenditure is also incurred on development of new technologies for supporting
sales and customer service programs. The development of online ordering platform has also
incurred larger investment on the part of the company. Further, automation of customer support
services and development of areas such as finance, human resources and information technology
can be also be regarded as the major investment and financing decisions made by the company in
the financial year 2017 (Coca-Cola Amatil: Annual Report, 2017).
Key corporate governance recommendations of ASX Corporate
Governance Council
Principle Recommendation
Solid Framework for Management and
Oversight
ASX listed companies need to disclose adequate the
roles of the board and the management people and it
has been compiled by the company
Appropriate Board Structure
Presence of a nomination committee, disclosure of
board skills mature and their tenure and
independence as per ASX principle
The company has developed proper ad defined code
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Ethical and Responsible Way of conduct for carrying out its daily operations as
per ethical policies and procedures
Safeguarding Integrity The development of audit committee by the
company for safeguarding the integrity of its
financial reporting
Timely and Balanced Disclosure
It develops and publishes the annual report in a
timely manner as per the ASX corporate governance
principle
Respecting the right of shareholders
The shareholders are provided information relating
to company operations through conducting annual
meetings with them by the company
Recognition and risk management It has also established a risk management framework
for identification and mitigation of any operational,
strategic or financial risk in advance
Fair and Responsible Remuneration
The company has established a distinct remuneration
committee for ensuring fair remuneration to the
executive directors and senior management people
(ASX Corporate Governance Council, 2017)
Information about the auditor and its independence
The auditing of the financial report of the company is carried out by Ernst and Young and
it has been declared by the auditor in this context that the financial statement of the company and
its subsidiaries has presented a true and fair view of their financial performance. The financial
reports have complied effectively with the Australian Accounting Standards and the
Corporations Regulations 2001 as per the auditor report. It has been stated in the annual report of
the company that the auditor declaration is in accordance with the Australian Auditing Standards.
The auditor has developed its report by act independently as of the Group as per the auditor
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independent requirements of the Corporations Act 2011 and the ethical policies of the Apes 110
Code of Ethics (Coca-Cola Amatil: Annual Report, 2017).
Measures taken by Coca Cola Amatil Ltd to ensure ethics in its business
operations
Coca-Cola Amatil Ltd has implemented ASX corporate governance principles in an
effective manner to ensure that all its business operations are carried out in an ethical manner. It
has established distinct risk, nomination, remuneration and audit committee for carrying out
regular review of its internal business operations and ensuring that they are carried out in an
ethical and responsible manner. It has also developed and implemented a Group’s Health and
Safety Wellbeing Policy that requires all its employees, suppliers, contractors and visitors to
comply with highest quality and safety requirements. It has strongly emphasized on creating
working environment that values inclusion and ensures that all people work together in a safe
environment without any type of discrimination faced by them on any grounds. Also, it has
adopted adequate policies for ensuring the protection of environment form nay type of negative
impacts of its operations. It has adopted adequate measures such as water stewardship,
sustainable packaging, energy management and climate protection for ensuring that all its supply
chain activities are carried out in an ethical and environmentally responsible manner (Coca-Cola
Amatil: Annual Report, 2017).
Top five investors of Coco Cola Amatil and their importance
The top five major shareholders of the company are stated as follows:
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Investors Issued Capital
Coca-Cola Holdings Limited 30.81 %
HSBC Custody Nominees 24.40%
JP Morgan Nominees Australia Limited 10.36%
Citicorp Nominees Pty Limited 9.75%
National Nominees Limited 2.31%
The major shareholders of the company have large ownership stake such as Coca-Cola
Holdings, HSB AND JP Morgan having more than 10% of the company’s shares have a right to
influence the policies and procedures of the company. They have a considerable say on the
decisions regarding the board of directors appointment and tenure and as such on the strategic
direction of the company. As such, it can be said that shareholders have large ownership stake
within the company has a direct or indirect impact on its operations and are also entitled to
receive the profits as dividends based on the performance of the company (Coca-Cola Amatil:
Annual Report, 2017).
Analysis of financial statements for year 2017
Financial Data used to calculate the financial ratios for year 2017
Coca Cola Amatil Ltd.
Amount in million $
Financial Items Amount (2017) Amount (2016)
Current assets $ 2,799.60 $ 3,104.80
Current liabilities $ 1,838.80 $ 1,843.10
Quick assets $ 2,129.30 $ 2,428.40
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Revenue $ 4,933.80 $ 5,077.70
Total Assets $ 6,056.90 $ 6,475.30
Average total assets $ 6,266.10
Cost of Goods Sold $ 2,839.60 $ 2,938.80
Inventory $ 670.30 $ 676.40
Average Inventory $ 673.35
Debt $ 4,176.60 $ 4,201.10
Shareholder's Equity $ 1,880.30 $ 2,274.20
Net Profit $ 461.00 $ 257.30
Financial Ratios
Ratios Formula Values for year 2017
Liquidity Ratios
Current Ratio
Current
Assets/Current
Liabilities 1.52
Quick Ratio
Quick Assets/Current
Liabilities 1.16
Efficiency Ratios
Assets turnover ratio
Revenue/Average
Total Assets 0.79
Inventory turnover ratio
Cost of Goods
Sold/Average
Inventory 4.22
Leverage Ratios/Solvency
ratios
Debt equity ratio Debt/Shareholder's 2.22
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Equity
Debt ratio Debt/Total Assets 68.96%
Profitability Ratios
Net Profit Ratio Net Profit/Revenue 9.34%
Return on equity
Net Profit/
Shareholder's Equity 24.52%
Market Ratios
Earnings Per Share (EPS)
Profit Attributable to
Equity
Shareholders/WANS $ 0.59
Dividend Payout Ratio DPS/EPS 186.20%
Liquidity Analysis
The liquidity analysis is used for examining the ability of a company to meet its financial
obligations as they become due. The analysis is important for investors and creditors to gain an
insight into the financial condition of a company to pay off their short and long-term dues
effectively (Holtzman, 2013). The liquidity position of Coco-Cola Amatil has been analyzed
with the use of calculating current and quick ratio. The current ratio depicts the ability of a
company to meet its short-term financial obligation with its current asset base. The ratio is
greater than 1 and as such indicates that it has maintained sufficient asset base fro meeting its
current liabilities (Coca-Cola Amatil: Annual Report, 2017). Also, the quack ratio for the
company which takes into account the assets that can be quickly transferred to cash is also
greater than 1 depicting that its liquidity position is good and there is less risk of possible default
on the part of the company (Barwise, 2012).
Efficiency Analysis
The analysis is used for depicting the ability of a company to effectively use its asset base
for generating revenue. It has been assessed with the use of asset and inventory turnover ratio for
the company. The asset turnover ratio measures the ability of a company to generate sales from
the use of its asset base (Porter, 2010). The ratio is less than 1 indicating that the company is not
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able to effectively use its asset base to realize revenue. The inventory turnover ratio depicts the
ability of a company to turn average inventory during a particular financial period. The company
has maintained a higher ratio indicating that it is able to effectively sell its inventory and
generating sales for the company during the particular period (Coca-Cola Amatil: Annual
Report, 2017). Thus, it can be said that the turnover of inventory is good but that of assets need
improvement (Diamond, 2017).
Leverage Analysis
The analysis depicts the overall debt possessed by a company in comparison to the equity
amount present. It has been analyzed with the use of debt equity and debt ratio for the company
Coca-Cola Amatil. The debt equity ratio shows the relative proportion of debt and equity
maintained by the company in its capital structure (Albrecht, 2010). The ratio is higher depicting
that it has maintained a large amount of debt as compared with equity in its capital structure. As
such, there is high financial risk associated with the company for default in case of not able to
meet its financial obligations. The debt ratio depicts the proportion of the assets of a company
that are financed by debt resources. The ratio is much higher indicating that the company is
financing large amount of its assets by the debt (Coca-Cola Amatil: Annual Report, 2017). Thus,
it can be said that the company is highly leverage which cannot be regarded good for the
investors (Beyer, 2010).
Profitability Analysis
The company has maintained a higher net profit and return on equity ratio which means
that is able to create profit for the shareholders and driving higher revenue for promoting its
ongoing growth and development. Thus, it can be said that the company has maintained a good
profitability position (Robinson, 2015).
Market Ratios
The company has also maintained an adequate market performance as reflected by its
earning per share ad dividend payout ratio. The earnings realized by the shareholders are
satisfactory while the company is also providing higher dividend to the shareholders making it
attractive for the investors to invest within the company (Coca-Cola Amatil: Annual Report,
2017).
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Cash flow management
Coca Cola Amatil manages its cash flow mostly by the cash collected from the
operations. Management at Coca Cola Amatil is efficient enough to collect accounts receivable
on time and cash collected can be used for managing working capital and also to make available
enough cash for financing investment projects. Looking at cash flow statement of year 2017, it
can said that company is also heavily dependent on external sources of funds such bank
borrowings and debentures. Company has also repaid major part of debt in year 2017 and also
used cash inflows to buy back equity shares from the open market. Overall cash flow position of
the company is strong and it is expected that it will become stronger in future (Coca-Cola
Amatil: Annual Report, 2017).
Overall Performance and Financial Status
It can be said from the overall financial analysis of the company that it has maintained
good liquidity and market value.. However it is using higher debt and also has lower efficiency
for utilizing it asset base than cannot be regarded as attractive for the investors (Coca-Cola
Amatil: Annual Report, 2017).
Conclusion
It can be said from the overall analysis of the annual report of the company that it
complies effectively with ASX corporate governance principles. It has large number of
shareholders and is incurring high investment on promoting growth of its new product launches.
The financial performance is good but it need to place emphasizes on improving its ability t use
its asset base and achieving an optimum balance of debt and equity in its capital structure.
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References
Albrecht, W. 2010. Financial Accounting. US: Cengage Learning.
ASX Corporate Governance Council. 2017. Corporate Governance Principles and
Recommendations. [Online]. Available at:
https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-
edn.pdf [Accessed on: 26 March 2017].
Barwise, P. 2012. Strategic Decisions. Germany: Springer Science & Business Media.
Beyer, S. 2010. International Corporate Finance - Impact of Financial Ratios on Long Term
Credit Ratings. Germany: GRIN Verlag.
Coca-Cola Amatil. 2017. Our Company. [Online]. Available at:
https://www.ccamatil.com/en/our-company [Accessed on: 26 March 2017].
Coca-Cola Amatil: Annual Report. 2017. [Online]. Available at:
https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-Report-
2017.ashx [Accessed on: 26 March 2017].
Diamond, S. 2017. Finnancial Accounting and Its Environtment: Financial Accounting.
Indonesia: Bukupedia.
Holtzman, P. 2013. Managerial Accounting For Dummies. USA: John Wiley & Sons.
Porter, G. 2010. Financial Accounting: The Impact on Decision Makers. US: Cengage Learning.
Robinson, T. 2015. International Financial Statement Analysis. John Wiley & Sons.
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