Coca Cola Amatil Limited: Financial Analysis and Board Assessment

This report provides a detailed analysis of Coca Cola Amatil Limited's financial performance and the characteristics of its board of directors. It includes information on the company's industry sector, primary activities, recent performance, board members' details, investment and financing decisions, and corporate governance policies.

Business Report
1

Contents
Contents...........................................................................................................................................2
Introduction......................................................................................................................................4
a) Provide a brief summary of the company. Include details such as industry sector, primary
activities, and recent performance...............................................................................................4
b) Table that outlines details of the Board of Directors. Include items such as name, gender,
age, education, career history, remuneration, and any other details you think are important or
interesting....................................................................................................................................5
c) Provide a brief assessment on the characteristics of the Board.............................................10
d) List and comment on important investment or financing decisions made by Coca Cola
Amatil Limited during the year.................................................................................................10
e) Coca Cola Amatil Limited follows the corporate governance recommendations of the
Australian Stock Exchange (ASX) Corporate Governance Council (CGC) and has several
policies in place to support its corporate conduct. Outline the key recommendations of the
ASX CGC in table format..........................................................................................................11
f) Identify the company’s audit firm; specify what auditor’s state in relation to the accounting
information and their independence..........................................................................................12
g) List some key measures taken by the Coca Cola Amatil Limited to ensure that its business
operations have incorporated high level of ethics and ethical judgments.................................13
h) Identify the top five investors of Coca Cola Amatil limited and comment on the
significance of their ownership stake........................................................................................13
i) Analyse the financial statements of Coca Cola Amatil Limited for 2017 using ratios and
comment on the following aspects of the company...................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
Appendix........................................................................................................................................18
Liquidity Ratios.........................................................................................................................18
Cash Flow Ratio........................................................................................................................18
Capital Structure........................................................................................................................18
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Profitability Ratio......................................................................................................................18
Asset Management Ratio...........................................................................................................19
3

Introduction
A company to achieve success must analyse its strategies and the management decision that they
have made during the year through which they can elaborate the strategies for future. This is
important for the company to analyse the financial performance and the environment in which
they are working so that they are able to make the key financial decisions on time. So for this
company has to form various short term and long term decisions which would help them to take
the ethical judgement as and when required (Ashley, 2017). While for achieving success the
company should interpret both the internal and external financial reports so as to make the
financial decisions more accurately. This soft drink Processing industry is considered as one of
the largest industry around the globe and is also the largest revenue generator in the Australia. In
this report the analysis would be done of Coca-Cola Amatil where the financial decisions and the
profitably of the company would be discussed. Also the financial ratios would be derived for the
company which would help in knowing the liquidity and the efficiency of the company.
a) Provide a brief summary of the company. Include details such as industry sector, primary
activities, and recent performance.
Coca-Cola Amatil is one of the biggest bottlers of the non-alcoholic drinks which are ready to
use. This company serves vast area so as to take over Asia-pacific market where there are no
competitors in the market. This is the one of the main bottling unit for Coca-Cola where they
assure the best in class bottling service for the company. Company is currently operating in six
nation state which includes Australia, New Zealand, Indonesia, Papua New and the Samoa where
they are considered as leaders. The company is currently working in Beverage industry and is the
leader in this sector. The company is having around 13,000 employees who are working day and
night so as to serve 270Mn consumers (Bini, Dainelli and Giunta, 2016). The company currently
has more than 130 plus brands to serve the consumers so that they are able to achieve The
company is also working in the segment of alcohol and the coffee operations across the Australia
these are done through the process of contracts. The company is focusing on stabilising the
earning and the returns in the Australia. Hence this has been seen in the company’s performance
has been good and the earning per share of the company in the year 2017 has been increased by
2.2 percent (Chairman’s Review, Annual report, Coco-Cola Amatil, 2017. Page no. 6). While on
the other hand the companies trading revenue has decreased by the 2.8% which is considered as
4

the fact for decreasing EBIT to around .7%. Company is having a long term partnership in the
sales and distribution, production packaging of world class range of brands (Burgess, 2016). The
diversified portfolio of the company contains the energy drinks, soft drinks, spring water, sports
drink, fruit juices, iced tea and flavoured milk, coffee, tea and the SPC Ardmona.
b) Table that outlines details of the Board of Directors. Include items such as name, gender, age,
education, career history, remuneration, and any other details you think are important or
interesting.
The company structure is vast and has various important people who are responsible to make the
company expand their operations so as to achieve the objective of maximising the sales. The
company is very much confidence about the diversity of the market products and the categories
of the product that they are tending to sell. (Chang, Hsu and Wu, 2015)
Hence some of the key players of the company who are making the company to achieve
the objective so as to maximise the profits are provided in the table below:
Position Name Gender Joined date Education Career
Chairman, Non-
executive
director(Independent)
Ilana Atlas Female 23rd Feb,
2011
Bachelors of
Jurisprudence
, Bachelors of
Law, Masters
of law
Director at
Westfield
corporations,
new Zealand
banking group
(Board of
directors,
Annual report,
Coco-Cola
Amatil, 2017.
Page no. 10)
Grouping managing
director, Executive
director
Alison
Watkins
Female March,
2014
Bachelors of
commerce
Director for
independent
studies and the
business council
of Australia
5

(Johnson, and et.
al., 2015).
Non-executive director John
Borghetti
Male December
2015
Managing
director, virgin
australia holding
limited.
Non-Executive director Catherine
Brenner
Female April, 2008 Bachelors of
law and the
economics,
masters of
administratio
n
(Mastracchio
and et. al.,
2015).
Chairman at
AMP limited
and director at
Boral Limited.
Non-Executive director Julie
Coates
Female March,
2018
Bachelors of
arts and
diploma of
education.
Director at
spotless group
holdings limited.
Non-Executive
director(Nominee of
TCCC)
Martin
Jansen
Male December,
2009
Bachelors of
commercial
economics.
Director at Haad
Thip public
company limited
(Foster and et.
al., 2015).
Non-executive director
(independent)
Mark
Johnsons
Male December,
2016
Bachelors of
commerce,
chartered
accountants
Australia and
new Zealand,
CPA
Director at g8
education
limited,
Westfield
limited (Cenere
and et. al.,
2015).
6

Australia
Non-executive director
(independent)
Paul
O’sullivan
Male March,
2017
Bachelors of
arts, graduate
at advance
management
program
Non-Executive
director(Nominee of
TCCC)
Krishna
Kumar
Thirumalai
Male March,
2014
Bachelors of
Engineering,
MBA,
Advanced
management
Program.
Director Coca-
Cola India Pvt.
Ltd.
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Group managing
director
Alison
Watkins
Female March,
2014
Bachelors of
commerce,
Chartered
accountant,
AICDA
Non-executive
director at
Australian new
Zealand bank,
Wools worth
limited and just
group. She was
also former
Victorian
president and
National board
members of the
Australian
Institute of
company
directors
(Kitching, Hart
and Wilson,
2015).
Managing director, new
Zealand & Fiji
Chris
Litchfield.
Male July, 2014 Bachelor’s
degree of
commerce
from
Canterbury
University.
The Career
began as a
graduate and
held as a sales
and commercial
roles before the
appointment to
the general
manager of sales
and marketing in
2007 (Anggara
8

Wijaya and
Setyohadi,
2017).
Managing director,
Australian beverages
Peter
Mcloughlin
Male March,
2017
Masters of
business
administratio
n, bachelors
of science in
mechanical
engineering
from
university of
natal.
The career
includes the
previous roles
such as
marketing
director and
director of
strategy in
united breweries,
CEO of pacific
beverages with
the joint venture
of Sabmiler.
Managing director,
alcohol & coffee
Shane
Richardson
Male November,
2013.
Bachelor’s
degree in
commerce
from
marketing.
Manging
director at
Campari
Australia.
Managing director,
Indonesia & PNG
Kadir
Gunduz
Male October,
2013
Bachelor’s
degree in
political
science and
public
management.
President CEO
of Aujan Coca-
Cola beverages
ltd. In Dubai.
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c) Provide a brief assessment on the characteristics of the Board.
The management of the company is focused on performing the obligations which would lead to
growth in the company’s wealth and bring the company to the new heights (Charles Jr,
Schmidheiny and Watts, 2017). As the company’s board comprises of various directors which
have a good experience in their relative field which would lead the company to achieve the
objective of performing best in class services. The management of the company basically
includes of the Directors and the executive directors. The chief executive officers are basically
recognised as the group managing director. The management of the company basically have
female members who are well educated and having a required skills so that they are able to
achieve the organisational goals. The board comprises of the members of Coca-Cola
international groups and the members already have a directorship in other group company. The
board of the company comprises of the executive team who are always ready to perform their
obligations as and when required by the company. The boards of company is having expertise in
the different areas so that they are able to implement the functions as and when demanded by the
company to achieve the objective of maximising the goals (Charter, 2017). The members of the
board is seen to be newly appointed and due to this the organisation is having a new blood
flowing within them. While various acquisition has been done by the board where they have
newly appointed Jane Bowd as their new Company secretary. Also there were two changes that
were made in the year 2018, where they appointed Liz McNamra as the group director of the
public affairs and the Kate Mason as the group director of People and culture. The company also
announced the group leadership team where the Chris Sullivan was appointed as Group director
(Crane and Matten, 2016). This is seen that the major shareholder of the company is Coca-Cola
Holdings Ltd., HSBC custody nominees limited, JP Morgan Nominees, National Nominees and
Citicorp Nominees Ltd.
d) List and comment on important investment or financing decisions made by Coca Cola Amatil
Limited during the year.
The Coca-Cola Amatil limited during the year took various investment decisions and financial
decisions to take the company to new heights of performing the obligations. This is seen that to
expand the company’s operations the company entered into the partnership programme where
they decided to expand their services in different parts of the world. As the company is profitable
company which is limited by shares (Djankov, 2016). The company took the decision to create a
10

property division which would handle the Australian and the New Zealand land and building
assets associated with the production and the warehousing facility. The company also focused on
deriving the income from the internal rent changes that are determined at the market rates. While
in the year 2017 the company also recognised and sold the Richlands property where they
recovers a gain of from the sale of amount $101.3Mn (Financial commentary, Annual report,
Coco-Cola Amatil, 2017. Page no. 39). The company commenced the series of cost and revenue
optimisations programs where they started remodelling of the supply chain functions across a
number of manufacturing sites. These were rebalanced in the product portfolio through the
review pack and brand offerings. The board of the company decided to release the dividend per
share to $154.7 and the franking credits that were given after the tax was around $10.9Mn. While
the company strategy of dividend reinvestment plan continued so that they were able to
regenerate the capital of the company from the reinvestment which is done by the process of
dividend (Eriksson and Kovalainen, 2015). While the companies working capital increased as a
result of financial decision from the previous year which is good indication of increasing the
profit of the company. In the current year the company recognised the requirement of debt and
increased it to the amount of around $300Mn (Financial commentary, Annual report, Coco-Cola
Amatil, 2017. Page no. 39).
e) Coca Cola Amatil Limited follows the corporate governance recommendations of the
Australian Stock Exchange (ASX) Corporate Governance Council (CGC) and has several
policies in place to support its corporate conduct. Outline the key recommendations of the
ASX CGC in table format.
The company is focused and has made various commitments to support the corporate governance
so that the business and the operations of the company are done more significantly and the
tediously (Galli, 2017). The company is working under the ASX ruling 4.10.3 where they are
required to follow the requirements otherwise this would lead to the penalty to them. These
recommendation includes the following.
Principle of ASX CGC council Recommendation of ASX CGC council
Lay concrete foundation for the organisation and
oversight
The information related to the roles and
responsibilities of the board and the management of
the company are not disclosed which should be
disclosed here in.
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Structure of board to add value Here the nomination committee should have at least
three members where the majority should be
independent director and the company has fulfilled
this requirement correctly.
Act ethically and responsibly The company should have a code of conduct which
specifies the code and the summary of doings of the
company.
Safeguard integrity and Incorporate reporting For this the company should have an audit
committee which would safeguard the integrity
hence the company complies with this.
Respect the rights of security holder The company should provide the information about
itself and the how it governs to the investors
through different medium of which one should be
its Website.
f) Identify the company’s audit firm; specify what auditor’s state in relation to the accounting
information and their independence.
The companies audit firm which is independently doing the audit of the company is Ernst and
young global limited. This is one of the big four firm which is auditing the company’s financial
information so as to make an opinion on its report (Goldratt, 2017). The firm founded various
matters which related to the company and should be fixed as early as possible so that better
accounting disclosure can be made to the investors of the company. The auditor stated that the
carrying value of the intangible assets comprises of the investment in the bottling agreement of
the $929.3Mn and the goodwill of $147.5Mn. This was considered as the critical accounting
estimated and assumptions specifically this concerned the assumptions of the future which may
impact the future cash flows. While also the accounting for rebated and the promotional
allowances were misconducted. As in this is seen that the recognised net rebated and the
promotional allowances owed to the customers based on their individual contractual
arrangements. Also the auditor of the company described that all the ethical requirements which
are required before completing the audit has been done regarding the independence (Isnasari,
Rahadjo and Dewanti, 2017). Also the matters that were communicated were most significant to
12

determine the matters which reports the financial status of the company performing their
obligations.
g) List some key measures taken by the Coca Cola Amatil Limited to ensure that its business
operations have incorporated high level of ethics and ethical judgments
The company for achieving the objective of creating and fostering the best practice so that they
are able to incorporate high level of ethics and ethical judgements. The company has made the
decision to provide equal opportunity and anti-discrimination while recruiting the employees.
They have also taken a decision to provide the employees with the workplace health and safety.
Also they have made a provisions where the employee should not act in any way which may lead
to harm to the reputation to the group (Kibaroğlu, 2016). Hence this would lead to provide best
employee and employer relationship. Also they have made a cell where the fraud, corrupt and the
irregular practices would be checked and action would be taken against them on this basis.
h) Identify the top five investors of Coca Cola Amatil limited and comment on the significance
of their ownership stake.
Coca-Cola Amatil Limited is a public limited company in Australia (Markus and Topi, 2015).
Hence the shareholding of the company can be seen as:
 With 29.21 percent of shareholding, Coca-Cola Holdings Ltd United states is the major
shareholding
 With 18.65% HSBC is the second biggest shareholder.
 While 10.05% is shared with JP Morgan Nominees
 Also 8.54% is held National Nominees Limited (Australia).
 While 5.93% is held by Citicorp Nominees Pty Limited.
i) Analyse the financial statements of Coca Cola Amatil Limited for 2017 using ratios and
comment on the following aspects of the company.
There are various ratios which are considered by the shareholder before making any investment
in the company (McKenzie and Woodruff, 2015). These ratios are helpful to them so that they
are able to make the future decisions as to if the company is profitable for them or not. These
ratios can be checked as:
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 Liquidity ratio: as the company’s liquidity ratio which includes current ratio is 1.52.
While the quick ratio is 1.12. Which is showing a good result. As the industry benchmark
for the ratio is 2:1.
 Asset management Efficiency ratio: This is the ratio where the efficiency of the asset is
being considered. Hence for this asset management ratio is .78. Which shows a bad return
on the asset and its efficiency.
 Profitability: the company is having a good profitability. As this is seen that the
company’s gross margin is 38.22, whereas the working capital turnover ratio of the
company is 5.08.
 Market Value: this is the tool that is used to define the market value of the company and
it is used so as to consider the return that the company is giving to its shareholders. Hence
the current P/E ratio of the company is 22.08, while on the other hand the Enterprise
value to EBITA is 8.93.
 Cash flow management: the company is managing its cash flow in best and suitable
manner as per their requirements. This is seen that the company’s free cash flow to the
sales percentage is 12.07%
Hence from the ratios and the financial analysis this can be seen that the company’s overall
performance is good and they are having a good financial status which is considered to be best
for the investors to perform their obligations (McMurray and et. al., 2016). Hence the
shareholders of the company can rely on the financial stability of the company.
Conclusion
From the above study this has been analysed that business report depicts how the
company is performing and the overall structure of the company is analysed through this. It has
been taken into the consideration that Coca-Cola Amatil is one of the biggest bottlers of the
world and are doing their business in best manner so that they are able to perform their functions
more significantly. The financial status of the company is stable and is expanding their business
in new direction to become global leader and hold the current position.
14

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Online
Annual report, 2017. [Online]. Available Online
<https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-Report-
2017.ashxsoft drinks, spring water, sports drink>.
17

Appendix
Liquidity Ratios
(1) Current ratio = Current Assets / Current Liabilities
= 27996/1838.8 = 1.52
Total current Assets = 2799.6
Total current Liabilities = 1838.8
So, current ratio is below ideal ratio i.e. 2:1
(2) Quick ratio = current Assets – Inventory – Prepaid expenses / Current Liabilities
= 2799.8-670.3-66.7 / 1838.8
= 1.12
Quick ratio is above ideal ratio i.e. 1:1
Cash Flow Ratio
(1) Operating cash flow/ Sales ratio
= Operating cash flow / Net Sales
589.2/4881.4*100
= 12.07%
(2) Dividend Pay-out ratio = Dividend per share/ Earning Per share
= 47/55.9 = 84%
Capital Structure
Debt to equity ratio = Total External Liabilities/ Total Shareholder’s equity
= 4176.6/ 1880.3 = 2.22
Very high debt equity ratio, company’s capital structure is not good
Profitability Ratio
(i) Gross Profit Ratio = Gross Profit/ Sales *100
= 1865.9/4881.4*100
= 38.22%
(ii)Net profit ratio = net profit /sales* 100
= 481/4881.4* 100
= 9.85%
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Asset Management Ratio
(i) Account Receivable Turnover Ratio = Net Credit Sales/ Average Account Receivable
Net Credit Sales = 4881.4
Average amount receivable = 997.8+976.6/2 = 987.35
= 4881.4/987.35 = 4.94 Times
Receivable collection Period = 365/4.94 = 74 Days or approx. 2, 5 Days
Therefore, it can be said that Turnover Ratio is low
(ii) Inventory Turnover Ratio = Cost of goods sold/ Average Inventory
= 2839.6/673.35 = 4.21
Avg. Inventory= 670.3+676.4/2= 673.35
(iii) Working capital turnover ratio = Net Annual Sales/ Average working capital
= 4881.4/2799.6-1838.8
= 4881.4/960.8 = 5.08
(iv) Fixed Asset Turnover Ratio = Net Sales/ Average Fixed Asset
= 4881.4/ 3313.9 = 1.47
(v) Total Asset Turnover Ratio = Total Sales/ Average total Asset
4881.4/6266.1 = 0.78
19