The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
The Australian business remains under pressure in the supermarket price wars, leading to price deflation. This remains the core concern for both margins and growth.
There are three reasons I remain bearish on CCL:
Firstly, the strategic review is unlikely to yield any major efficiency in the interim, considering the strong performance of CCL in the past. Material cost reductions are unlikely because the company is already operationally efficient. Further declines here may actually impact revenue.
Secondly, CCL operates at an approximate 46% premium to its competitors. A price squeeze will remain a major detractor.
Finally, guidance remains broadly flat for the core Australian division, while its volatile Indonesian and Papua New Guinean markets have a growth profile of 8%. However, this is due to the alcoholic beverage division – something the core Australian market does not have exposure too.