CCL (ASX) glad i sold yest

Originally posted by eight ↑

Good point! P/E ratio is one of the fundamental analysis, Warren Buffett undertake.
Here's the P/E forecast from a number of sources.
1. 16.05 (yahoo finance) for 2015
2. 17.3624 (Bloomberg) for 2014
3.150.91 (Wall Street Journal) for 2014 (statutory profit, including write-off)

AnDy62 has a very good point. CCA is a distributor, no the manufacturer of coca cola. Its profit margin relies on the difference between the retail price and the cost of production(water, coca cola ingredient and etc). From the recent report, its profit margin (beverage) drops
from 19.2% to 16.6% in Australia, 16.9% to 16.8 in New Zealand, 7.3% to 1.2% in PNG and Indonesia. Australia markets accounts for 83%($226M) of the total beverage profit($270M).
While Alcohol, Food & Services grew 4.5% but only contribute $46.8M (17% of the beverage profit).

In short, about 80% of its profit is from Australia. When other geographical areas are of much smaller revenue and in fact most of its emerging market is a head ache, only NZ profit is growing.

I have a feeling that CCA was really making incorrect prediction about how its emerging market could change the game, when in fact most of its profit is still from Australia. Looking at condition in Australia, unemployment rate is record-high 6.4% in July,2014. Seriously, I dont believe most of people will be buying a coke for $3-4, if they could get other soft drinks for less than $2.

A paradox, if CCA reduces its selling price, its profit will be even lower. But, if CCA keeps its price high, its revenue will decline, due to affordability.

But, the way I see out is that CCA must reduces its selling price and introduce more healthier categories of drinks, by doing so => it possibly captures larger share of the market to offset the drop in profit margin.=> volume sales strategy (lower profit margin+higher revenue)=> hopefully higher total profit.

But, CCA is lacking the foresight to make painful but critical change in strategy, cost-cutting can only do so much. but increasing revenue and build larger market share will be an important competitive advantage.

Expand

I have not come across one analyst report or verbatim that highlights the CCL volume share in post mix / frozen bev now, vs say 5 years ago. Secondly, with their high interest in the on premise channel, you'd expect an advanced sales force would sell multiple package types. What's the volume of post mix in the on premise channel now vs 5 years ago. CCL is not just a packaged product business, there's substantial volume and profit (and scale to negotiate syrup prices with TCCC) here.

BTH

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