going north, page-18

The full year results are due out in less than 3 weeks.

I reckon the share price recovery from $6 to $8 is pretty much a recognition that this is a good business which was oversold.
The main reason being their input cost increases (tin plate, sugar etc) which they are probaly already starting to recover.
Gross margins fell from about 85% to 75% since 2004, and for a company which has annual sales of $4 billion this represents a fair bit of upside.
Admittedly, the acquisition of SPC, which is a lower margin business has contributed to the contraction in margins, but on the other hand 2005 only had 10 months of SPC contribution, whereas in 2006 we will get all 12 months.


However, more needs to be done for the share price to take the next step.

a) They must flog the Korean business. It has 20% of the company's assets tied up and only contributes 4% of the profits.

b) In fact I wouldnt mind if they sold Indonesia as well.

c) Concentrate on the two businesses which are pulling their weight, Australia and New Zealand. Not only are they profitable, they also fit with the strategy of leveraging CCL's superior marketing chanels to expand into other categories like food, coffee and the emerging alcoholic beverages.

UBS have been heavy sellers of CCL's share in the past week. They probably reckon that the easy money has been made. I reckon they are wrong, because if CCL do some of the things above, they have a lot of upside which the current share price does not capture.

I am betting on Terry Davis to know what needs to be done.