Coca Cola Amatil share price has took a big hit during the Covid sell off and is one of the worst performers in the S&P/ASX 50.
The slow recovery in CCL share price can be attributed a number of factors directly attributed to the changes instilled by Covid and its persistence which provides a number of reasons for investors to hesitate to buy back in.
CCL Share Performance
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ASX CCL is one of the companies we have kept an eye on overtime. The business is mature and cash flow stable at least until Covid hit. The fall the share price and continual weakness provides a long term opportunity to add to our investment portfolio.
We think the headwinds faced by the business, and there are clearly some major headwinds are short term in nature but the brand value and distribution reach is unparalleled and if you look through these issues the returns are attractive verses the risks.
The current ASX CCL dividend yield is inflated as we expect the dividend to be cut in late 2020 however as a long term shareholder we’ll get access to the cash later once there is more certainty in operating performance and the short term weakness provides a buying opportunity.
CCL Share Price Performance
The major issue faced by the business as result of shutdown of restaurant trading is seen through falling volumes and revenues. The wholesale of drinks to food and beverage operators were much more profitable than retail and with restaurants closed it effectively lost a key revenue source.
Currently ASX CCL is overly reliant on supermarket sales and with supermarket shelves precious real estate these days it hardly makes up the the fall in sales to restaurants.
In addition to changes to the distribution channels there are also macro forces at play. CCL operates predominantly in Australia, New Zealand (pacific islanders) and Indonesia. New Zealand has handled Covid well and in turn it looks like one of the bright business segments. Like the rest of the NZX 50 with large domestic operations the bounce back in business performance has been rapid.
Indonesia is frankly a basket case which we think is another major reason the share price has been weak. Prior to the current crisis it was a key avenue along with alcoholic beverages as a key source of growth.
The drastic fall in Indonesia sales and volume presents a clear short and medium term headwind as it is currently unclear when the Covid situation is under control there. We expect the CCL share price will continue to perform poorly until the Covid cases in Indonesia turns for the better and Australia stabilizes.
CCL Dividend
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