Coca-Cola Amatil will sell its fruit and vegetable processing business, SPC, which is expected to record a $10 million loss for the 2017-18 financial year.
The beverage company’s decision to sell SPC comes four years after the Victorian government and Coca-Cola Amatil co-invested $100 million ($78 and $22 million respectively) to help the struggling business.
Coca-Cola Amatil initiated a strategic review into SPC in August. The company’s group managing director, Alison Watkins, said that while there were no plans to close SPC, the review had concluded that selling the Shepparton-based firm would provide the best means of enabling it to grow in the future.
“We believe there are many opportunities for growth in SPC, including new products and markets, further efficiency improvements, and leveraging technology and intellectual property,” Watkins said.
“The review has concluded that the best way to unlock these opportunities is through divestment, enabling SPC to maximise its potential with the benefit of the recent $100 million co-investment, while Amatil sharpens its focus as a beverages powerhouse.”
Watkins said that while SPC production would for now continue as normal at Shepparton and Kyabram, Coca-Cola Amantil would develop a divestment timeline and process over the coming months.
Watkins also indicated that Coca Cola Amatil has decided that the IXL and Taylor’s brands will remain with SPC following the announcement on 21 November that an expected sale to Kyabram Conserves will no longer proceed.
Coca Cola Amatil has invested approximately $250 million into SPC since acquiring it in 2005, including in new tomato and high-speed snack lines, a new aseptic fruit processing system and new export opportunities including in China.
Watkins said that Coca-Cola Amatil expects its 2017-18 full-year results will weighed down by $50 million in expenses due to “cost optimisation programs” and that the company would possibly be unable to meet earnings growth target in the 2018-19 financial year due to factors that include the impacts of container deposit schemes in Australia, higher PET resin costs and a weak Indonesian rupiah.
Watkins said that SPC’s $10 million loss was “modest” and “not a big deal” in the long-run.
“The challenge for the business is top-line growth, but the core structure of the business now is very good. So what will move that loss to a profit is growth, and that’s what the business is poised to do,” Watkins said.
“We really see a very bright future as a result of the investment we’ve made.”