CCL 190214

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This report has been prepared by UBS Securities Australia Ltd.

Global Research 18 February 2014

Coca-Cola Amatil LimitedWeak FY13 result as expected. Wat kin Alison do?

Event: Weak FY13 due to competition in Australian grocery segment

CCL reported a 7% fall in FY13 EBIT driven by ongoing price competition in the Australian grocery channel, unfavourable FX moves in Indonesia & PNG, and a weak performance from SPC Ardmona. NZ & Fiji, along with Alcohol were bright spots. The price premium of CCL products to Asahi/Schweppes (Australian Pepsi distributor) is now 49% (up from 43% in FY12) a level that needs defending.

Impact: Our FY14e EBIT lowered 4.4% to $839m (FY15e -6.4% to $866m)

We expect consensus EBIT to fall given today's result. We have taken the opportunity to cut our FY14 and FY15 numbers as well, despite being below consensus anyway. CCL's performance for FY14 will be determined in large part by whether or not CCL can get volume growth, without conceding too much price, in the Australian grocery channel. This depends in part on how deep Asahi/Schweppes's pockets are.

Action: Structural headwinds continue. Remain cautious. Waiting for new CEO.

This is clearly a disappointing result for outgoing CEO Terry Davis. CCL's strategy appears sensible, so we await commentary from the incoming CEO Alison Watkins to assess any changes made. Alison starts Monday 3rd March. We remain cautious on the stock given the headwinds of strong competition, consumer switching away from carbonated soft drinks and powerful customers in the Australian grocery channel.

Valuation: 12-mth PT lowered to $11.36/share (from $11.47). Stay with Neutral.

We have lowered our 12-month PT (SOTP-based) for CCL to $11.36/share (from $11.47) and maintain our Neutral rating on the stock. A lower Net Debt assumption for FY14e has been more than offset by our lower FY14e Group EBIT (-4.4%) and a drop in the EV:EBIT premium to the market we assume for the Australian business. We have moved this to 10% (from 15%) reflecting a more conservative stance.

Equities

Australia

Soft Drinks

12-month rating Neutral

12m price target A$11.36

Prior: A$11.47

Price A$11.22

RIC: CCL.AX BBG: CCL AU

Trading data and key metrics

52-wk range A$15.25-11.22

Market cap. A$8.57bn/US$8.18bn

Shares o/s 764m (ORD)

Free float 70%

Avg. daily volume ('000) 1,892

Avg. daily value (m) A$22.4

Common s/h equity (12/14E) A$1.78bn

P/BV (12/14E) 4.8x

Net debt / EBITDA (12/14E) 1.6x

EPS (UBS, diluted) (A$)

From To % ch Cons.

12/14E 0.70 0.67 -4.24 0.71

12/15E 0.74 0.69 -6.63 0.76

12/16E 0.78 0.71 -8.74 0.79

Craig Stafford, CFAAnalyst

[email protected]+61-2-9324 2277

Ben GilbertAnalyst

[email protected]+61-2-9324 2782

Highlights (A$m) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18ERevenues 4,856 5,139 5,084 5,341 5,582 5,806 6,017 6,211EBIT (UBS) 869 896 833 839 866 890 924 956Net earnings (UBS) 532 559 503 515 532 547 570 593EPS (UBS, diluted) (A$) 0.70 0.73 0.66 0.67 0.69 0.71 0.74 0.76DPS (A$) 0.53 0.60 0.59 0.59 0.55 0.57 0.59 0.61Net (debt) / cash (1,644) (1,609) (1,682) (1,758) (1,769) (1,825) (1,859) (1,871)

Profitability/valuation 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18EEBIT margin % 17.9 17.4 16.4 15.7 15.5 15.3 15.4 15.4ROIC (EBIT) % 20.1 19.7 19.0 19.9 20.0 19.9 20.0 20.0EV/EBITDA (core) x 9.6 10.0 10.7 9.3 8.9 8.6 8.2 7.8P/E (UBS, diluted) x 16.6 17.6 19.8 16.7 16.2 15.8 15.2 14.7Equity FCF (UBS) yield % 3.3 6.2 3.4 3.9 4.9 4.4 4.8 4.9Net dividend yield % 4.5 4.6 4.5 5.2 4.9 5.1 5.3 5.4Source: Company accounts, Thomson Reuters, UBS estimates. Metrics marked as (UBS) have had analyst adjustments applied. Valuations: based on an average share price that year, (E): based on a share price of A$11.22 on 18 Feb 2014 17:41 EST

UBS 46

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This report has been prepared by UBS Securities Australia Ltd and distributed by Bell Potter Securities Ltd ANALYST CERTIFICATION AND REQUIRED DISCLOSURES SECTION AT END OF REPORT. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict

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Craig Stafford, CFA, Analyst, [email protected], +61-2-9324 2277

Coca-Cola Amatil Limited 18 February 2014

Investment Thesis 12-month rating Neutral

Coca-Cola Amatil 12m price target A$11.36

Investment case

We see CCL as part way through a PE de-rate because:1. Capex has been growing faster than sales (ROIC is falling from 22% in FY10 to 17% in FY14e);2. Low hanging cost out opportunities appear harder to find;3. Price competition in the Australian supermarket channel still appears strong;4. Bottled water is a key growth market, but brand differentiation and therefore price premium remains difficult;5. Indonesia (12% EV) has been the main source of CCL Group growth in recent times but we expect growth to normalise as CCL appears to be losing share to low priced competitors. The main risk to our cautious call is: a) a value accretive beer deal (possible, but unlikely); and b) an easing of price based competition with Asahi/Schweppes.

Upside scenario

The upside scenario detailed below could conservatively deliver a 10% valuation upgrade to $12.62/share (from $11.47).1. A value accretive beer deal (possible but unlikely);2 An easing of price based competition with Asahi/Schweppes (less likely in the near term we feel);3. Accelerating price and volume growth via improving the hit rate of product innovation; and4. After spending a lot on capex in recent years, CCL ease off for a few years and generate significant uplift in FCF.

Downside scenario

A delay in the easing of higher than normal price based competition from Asahi/Schweppes by 2 years combined with a bigger loss in market share of carbonated soft drinks (CSDs) in the Australian beverage market could result in EPS downgrades of 10% and a de-rating of the PE that CCL trades on to reduce our valuation by around 15% to $9.75/share (from $11.47).

Upcoming catalysts

1. Mon 3 Mar 2014: New CEO, Alison Watkins due to start.2. Tue 13 May 2014: AGM.3. Late Aug 2014: FY14 half year result.4. Fri 29 Aug 2014: Outgoing CEO, Terry Davis expected to finish.

Business description

Coca-Cola Amatil (CCL) is the Australasian anchor bottler in the Coca-Cola system. CCL's portfolio of territories includes Australia, New Zealand, Fiji, Papua New Guinea and Indonesia (South Korea was divested in 2007), with Australia contributing approximately 72% of group earnings. CCL acquired SPC Ardmona in April 2005, which was a significant diversification move into food. In 2006, the company also expanded into spirits distribution and has a strategy of becoming the clear number three player in the Australian beer market by 2014.

Industry outlook

1. Market concentration in the Australia non-alcoholic beverage market is reasonably high, with CCL (#1) and Asahi/Schweppes (#2) controlling 66% by value.2. Continued high levels of price based competition between CCL & Asahi/Schweppes is keeping pressure on margin growth.3. Health trends are pushing demand away from carbonated soft drinks (CSDs) towards bottled water and other beverages with perceived (often not real) health value.4. New product innovation by industry participants continues in an attempt to stem the trend towards water.5. While CCL enjoys strong brands, the dominance of Coles and Woolworths in the grocery sector is limiting margin growth.

Revenues by division (FY14e, %)

EBIT by division (A$m)

FY10 FY11 FY12 FY13 FY14e FY15e FY16e

Australia 593 607 621 575 595 626 648

NZ & Fiji 81 80 70 80 88 94 100

Indonesia &

PNG75 88 103 104 95 108 123

Food & Services 94 93 95 89 98 98 98

Group 843 868 889 847 877 925 969

Source: CCL, UBS Estimates.

Australia58%

NZ & Fiji9%

Indonesia & PNG19%

Food & Services

14%

UBS 47


Result Summary

Figure 1: Coca-Cola Amatil (CCL) FY13 Result Summary

$m FY12 FY13 Change (%) UBSe Diff (%) Comment

Operating Revenue 5,139 5,084 -1.1% 5,072 -0.2% CCL struggling for top line growth

EBITDA 1,129 1,085 -3.9% 1101 1.5%

Depreciation & Amortisation -233 -252 7.8% -254 0.9%

+ Australia 621 566 -8.9% 575 1.6% Strong competition in Grocery, weak consumer, trend away from CSD

+ NZ & Fiji 70 83 18.0% 80 -3.5% Good result in NZ and Fiji, assisted by favourable FX

+ Indo & PNG 103 92 -11.0% 104 13.1% >10% Vol g from Indo, was hit by weak PNG Vol g and unfavourable FX

+ Food & Serv 95 93 -2.2% 89 -4.7% Strong result from Alcohol, offset by weak SPC Ardmona

+ Other 0 1 1 0.0%

= EBIT 895 833 -6.9% 847 1.7%

Net Interest -112 -125 11.5% -133 6.6%

Tax Expense -225 -205 -8.9% -199 -3.0%

Reported NPAT (ex one offs) 558 503 -10.0% 515 2.5%

Reported NPAT 460 80 -82.6% 506 533.5% $404m write down of SPC Ardmona business to c$300m

Core EPS 73.4 65.9 -10.2% 66.1 0.3%

DPS 59.5 58.5 -1.7% 59.9 2.4%

Source: CCL, UBS estimates

Cash flow and Dividends: Operating Cash Flow (OCF) came in at $733m 1%

below FY12 at $742m, representing an EBITDA conversion rate of 75% (73% for

FY12). The Dividend Pay-out Ratio (DPR) for FY13 was 89% in line with

expectations. We continue to model a 90% DPR going forward.

Capex: After a heavy capex program over the last 4 years. We expect capex to

drop to $350m for FY14 (in line with management guidance) and remain at a

similar level in FY15. Capex for the last 4 years has ranged from $361-464m with a

Capex / DA ratio of 1.6-2.0x. This capex has been primarily spent on 4 PET plants

in Australia as well as a significant fridge roll out program in Australia and

Indonesia (which will continue).

Gearing and Balance Sheet: CCL's Balance Sheet is in great shape with Net

Interest / EBIT of 6.7x (albeit down from 7.8x in FY12). Cash deposits are high at

$1.4b and will be used fund debt maturities to Mar-16.

UBS 48


Earnings Changes

Expect consensus numbers to come down: As usual earnings guidance for the

current year (FY14) will be provided at the AGM (13 May 2014). FY14 consensus

EBIT is $885m, which appears too optimistic given today's FY13 result of $833m.

Figure 2: Coca-Cola Amatil (CCL) Earnings Changes for FY14e, FY15e & FY16e

FY14e (A$m) Was Is Now Change %

Net revenue 5,345 5,341 -0.1%

EBIT 877 839 -4.4%

Reported NPAT 539 515 -4.4%

Core NPAT 539 515 -4.4%

Core EPS (cps) 70.3 67.3 -4.2%

DPS (cps) 61.2 58.7 -4.2%

FY15e (A$m) Was Is Now Change %

Net revenue 5,589 5,582 -0.1%

EBIT 926 866 -6.4%

Reported NPAT 571 532 -6.8%

Core NPAT 571 532 -6.8%

Core EPS (cps) 74.2 69.3 -6.6%

DPS (cps) 59.4 55.4 -6.6%

Source: GFF, UBS estimates

UBS Valuation for CCLFigure 3: CCL Sum-of-the-parts valuation

Segment3 year forward

EBIT CAGR (%)

FY14e EBIT

($m)

Premium / discount

vs market (%)

EBIT Multiple

(x)

Asset Valuation

($)

Australia (A$m) 1.4% 566 10% 12.7x 7,160

NZ / Fiji (A$m) 7.2% 83 5% 12.1x 999

Indonesia / PNG (A$m) 2.3% 92 15% 13.2x 1,211

Food & services (A$m) 2.3% 93 0% 11.5x 1,070

Other (A$m) 1 0% 11.5x 9

Total (A$m) 2.2% 834 10,449

Net Debt (FY14e, A$m) -1,758

Equity value (A$m) 8,691

Shares on issue (FY14e, m) 765

Per share valuation $11.36

Source: UBS Estimates

Valuation Sensitivities

If our FY14e EBIT forecast for the Australia division was 5% lower (say) and we

reduced the EV:EBIT premium that it trades on vs. the market (Median Ind ex-Fins)

to 5% (from 10%), our valuation falls by $0.87/share to $10.49 (from $11.36).

Figure 4: CCL Valuation sensitivity

EV:EBIT Premium to Market for CCL EBIT for Australia

$11.36 -5% 0% 5% 10% 15% 20%

-15% A$481m $8.87 $9.23 $9.59 $9.96 $10.32 $10.68

-10% A$509m $9.28 $9.66 $10.04 $10.42 $10.81 $11.19

-5% A$538m $9.68 $10.08 $10.49 $10.89 $11.30 $11.70

UBSe A$566m $10.08 $10.51 $10.93 $11.36 $11.78 $12.21

5% A$594m $10.49 $10.93 $11.38 $11.83 $12.27 $12.72

10% A$623m $10.89 $11.36 $11.83 $12.30 $12.76 $13.23

15% A$651m $11.30 $11.78 $12.27 $12.76 $13.25 $13.74

CC

L E

BIT

fo

rA

ust

rali

a (

A$m

)

Source: UBS Estimates

We expect consensus numbers to

come down

CCL SOTP valuation lowered by

$0.11/share to $11.36/share (from

$11.47), due to: 1) lower Net

Debt; and 2) 10% EV/EBIT

premium for Australia (down

from 15%).

A 5% cut to EBIT for Australia + a

5% EV:EBIT premium =

$0.87/share off our valuation

UBS 49


Divisional Summary

Australia (Rev. -2.7%, EBIT -9.4%, Margin -1.4pts)

A number of factors contributed to a weak result for the Australia division. 1)

ongoing and aggressive competition from major rival Asahi/Schweppes "AS"

(Pepsi and Schweppes distributor in Australia) saw the CCL price premium to AS

blow out to 49% from 43% in FY12. This is not sustainable and needed to be

defended; 2) An ongoing shift away from carbonated soft drinks (CSD's) towards

bottled water for health reasons; and 3) A still generally weak spending

environment with below-average consumer confidence. All of these trends are

likely to continue.

New Zealand & Fiji (Rev +12%, EBIT +18%, Margin +0.9pts)

NZ$ EBIT growth was 10% for FY13, and with the strong appreciation of NZ$ vs

the A$, EBIT for the division in A$ terms was an impressive +18%. Both countries

delivered improved performances, with volumes up 2.7% for FY13 (vs FY12).

Despite this good performance it is still worth noting that EBIT in NZ$ terms is still

below the levels delivered by the group in FY10 and FY11.

Figure 5: Australia division (A$) Figure 6: New Zealand & Fiji (A$)

Australia FY12 FY13 Growth FY14e Growth

Revenue (A$m) 3,028 2,947 -2.7% 2,992 1.5%

Volume (m litres) 349 338 -3.2% 343 1.5%

Revenue / Case (A$) A$8.67 A$8.71 0.5% A$8.72 0.0%

EBIT (A$m) 624 566 -9.4% 571 0.8%

Margin (%) 20.6% 19.2% -142bp 19.1% -13bp

NZ / Fiji FY12 FY13 Growth FY14e Growth

Revenue (A$m) 403 453 12.3% 511 12.9%

Volume (m litres) 59.9 61.5 2.7% 62.4 1.5%

Revenue / Case (A$) A$6.72 A$7.36 9.4% A$8.18 11.2%

EBIT (A$m) 70 83 18.0% 94 13.8%

Margin (%) 17.4% 18.3% 87bp 18.4% 14bp

Source: CCL, UBS Estimates Source: CCL, UBS Estimates

Indonesia & PNG (Rev -3.1%, EBIT -11%, Margin -0.9pts)

Despite Indonesia volumes growing by >10% and local FX EBIT +5%, this result is

still a far cry away from what the bulls have been expecting for this region.

Headwinds came from cost inflation (wages and fuel) as well as ongoing

competition from lower priced products. A weaker IDR did not help matters either,

nor did a weak performance from PNG both from an operational level as well as a

weaker FX. We continue to guess the split of this division between Indonesia and

PNG.

Alcohol, Food & Services (Rev -0.1%, EBIT -2.2%, Margin -0.2 pts)

SPC Ardmona's (SPCA) EBIT contribution probably cost the Group around 2% EBIT

growth. There was also a $404m (post tax and largely non-cash) write-down to the

carrying value of c$300m. This was made up of $277m goodwill, $40m write-

down in brands, and $87m for inventory, PP&E and onerous contracts. Over the

next 3 years $100m will be invested into the business ($78m CCL + $22m

Victorian Government) to drive productivity and innovation. SPCA has secured the

support of major customers, so we think getting this business on track is entirely

possible (albeit difficult).

The Alcohol business performed well and has a good portfolio of brands with

which to build earnings. According to management, EBIT from the Alcohol

business could be around the same as the Pacific Beverages JV in half the time. We

think this is achievable.

Australia weak, due to:

1. Price competition from AS;

2. A shift away from CSD; and

3. A weak spending environment.

A good turnaround for NZ helped

by a strong appreciation of the

NZ$

Indonesia is not the growth

engine the bulls will have you

believe.

A strong result from Alcohol was

offset by a weak SPCA result….

…Alcohol is set to deliver 1-2% to

Group EBIT over the coming years

UBS 50


Figure 7: Indonesia / PNG (A$m) Figure 8: Alcohol, Food & Services (A$m)

Indonesia / PNG FY12 FY13 Growth FY14e Growth

Revenue (A$m) 948 919 -3.1% 910 -1.0%

Volume (m litres) 167 179 6.8% 191 6.8%

Revenue / Case (A$) A$5.66 A$5.14 -9.2% A$4.77 -7.3%

EBIT (A$m) 103 92 -11.0% 82 -10.1%

Margin (%) 10.9% 10.0% -89bp 9.1% -91bp

Food FY12 FY13 Growth FY14e Growth

Revenue (A$m) 719 718 -0.1% 718 0.0%

EBIT (A$m) 95 93 -2.2% 91 -1.9%

Margin (%) 13.2% 13.0% -27bp 12.7% -25bp

Source: CCL, UBS Estimates Source: CCL, UBS Estimates

Cold Beverage Volumes and Sales Values by Category

The charts below show that Carbonated Soft Drink (CSD) as a category is losing

share vs. Bottled Still Water. We attribute this trend mostly to the health trends

driving consumer behaviour.

"Consumers' lives have changed beyond all recognition over the last few

decades, and the food industry will have to work hard to continue to

meet consumer needs in 2014. Health and ageing concerns and the

requirement for great portability has led to further innovation in

formulation, flavouring, packaging and labelling." www.Just-food.com

CSD manufacturers have been pulling hard on the price lever to maintain Sales

Value in the face of these volume declines, but there is a limit in our view.

Figure 9: Volume by Category Aust. Grocery Segment (%) Figure 10: Sales by Category in Aust. Grocery Segment

(%)

Source: Retail World, UBS estimates Source: Retail World, UBS estimates

Cold Beverage Volumes and Sales Values by Company

The charts below show that Private Label has been gaining volume share in the

Australian Grocery segment (+700bp), but has not done as well with Sales Value

(+210 bp). This has been at the expense of CCL (Volume -600 bp, Value -190 bp)

and Asahi/Schweppes (Volume -280 bp, Value -260bp).

In short Private Label is winning.

57.5% 57.1% 57.0% 56.0% 55.7% 53.8%

15.8% 15.7% 15.0% 15.2% 13.7% 12.7%

10.4% 10.6% 10.5% 11.4% 13.4% 15.5%

0.8% 1.2% 1.5% 2.1% 2.2% 1.9%

15.5% 15.4% 16.0% 15.3% 14.9% 16.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CY08 CY09 CY10 CY11 CY12 CY13

Soft Drink Fruit Juice / Drink Still Water Energy Drink Other

53.5% 53.1% 53.9% 55.9% 53.6% 53.3%

17.5% 16.7% 15.5% 14.3% 14.4% 13.8%

7.1% 7.5% 7.1% 6.6% 7.4% 8.6%

4.3% 5.5% 6.3% 7.2% 8.0% 7.0%

17.6% 17.1% 17.2% 16.0% 16.7% 17.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Soft Drink Fruit Juice / Drink Still Water Energy Drink Other

Carbonated Soft Drink (CSD) has

lost 370 bp of volume share over

the last 6 years while Bottled Still

Water has gained 510 bp....

….despite this volume trend CSD

has kept its Sales Value Share

over the same period,

highlighting CSD brands have

better pricing power vs. Bottled

Still Water, but there is a limit.

CCL lost 600 bp of volume share

over the last 6 years, vs

Asahi/Schweppes -280 bp while

Private Label +700 bp…...CCL saw

a smaller Sales decline (-190 bp)

vs. Asahi Schweppes (-260 bp) &

Private Label (+210 bp)

UBS 51


Figure 11: Volume by Company Aust. Grocery Segment

(%)

Figure 12: Volume by Company Aust. Grocery Segment

(%)

Source: Retail World, UBS estimates Source: Retail World, UBS estimates

42.4% 40.5% 41.4% 39.8% 39.4% 36.4%

29.2% 31.6% 31.0%26.7% 26.5% 26.4%

9.3% 10.0% 10.3%11.5% 14.0% 16.3%

19.1% 17.9% 17.3% 22.0% 20.1% 20.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


CCL Schweppes Private Label Other

45.8% 46.4% 47.2% 46.5% 46.8% 43.9%

25.0% 24.8% 24.7% 21.8% 21.7% 22.4%

5.2% 5.0% 5.0%5.3% 6.1% 7.3%

24.0% 23.8% 23.1% 26.4% 25.4% 26.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


CCL Schweppes Private Label Other

UBS 52


Coca-Cola Amatil Limited (CCL.AX)

Income statement (A$m) 12/11 12/12 12/13 12/14E % ch 12/15E % ch 12/16E 12/17E 12/18ERevenues 4,856 5,139 5,084 5,341 5.1 5,582 4.5 5,806 6,017 6,211Gross profit - 5,139 5,084 5,341 5.1 5,582 4.5 5,806 6,017 -EBITDA (UBS) 1,074 1,129 1,085 1,108 2.1 1,157 4.4 1,207 1,271 1,335Depreciation & amortisation (205) (233) (251) (269) 7.0 (290) 7.9 (317) (346) (378)EBIT (UBS) 869 896 833 839 0.7 866 3.3 890 924 956Associates & investment income 0 0 0 0 - 0 - 0 0 0Other non-operating income 0 0 0 0 - 0 - 0 0 0Net interest (128) (112) (125) (112) 10.4 (115) -3.0 (117) (119) (120)Exceptionals (incl goodwill) 0 0 0 0 - 0 - 0 0 0Profit before tax 741 784 709 727 2.6 751 3.3 773 805 836Tax (209) (225) (205) (211) -2.8 (218) -3.3 (224) (233) (243)Profit after tax 532 559 504 516 2.5 533 3.3 549 572 594Preference dividends 0 0 0 0 - 0 - 0 0 0Minorities 0 0 (1) (1) -71.43 (1) 0.00 (1) (1) (1)Extraordinary items 60 (98) (423) 0 - 0 - 0 0 0Net earnings (local GAAP) 592 460 80 515 544.5 532 3.3 547 570 593Net earnings (UBS) 532 559 503 515 2.4 532 3.3 547 570 593Tax rate (%) 28.2 28.7 28.9 29.0 0.2 29.0 0.0 29.0 29.0 29.0

Per share (A$) 12/11 12/12 12/13 12/14E % ch 12/15E % ch 12/16E 12/17E 12/18EEPS (UBS, diluted) 0.70 0.73 0.66 0.67 2.1 0.69 2.9 0.71 0.74 0.76EPS (local GAAP, diluted) 0.78 0.60 0.10 0.67 542.7 0.69 2.9 0.71 0.74 0.76EPS (UBS, basic) 0.70 0.73 0.66 0.67 2.1 0.69 2.9 0.71 0.74 0.76Net DPS (A$) 0.53 0.60 0.59 0.59 0.3 0.55 -5.6 0.57 0.59 0.61Cash EPS (UBS, diluted)1 0.97 1.04 0.99 1.02 3.7 1.07 4.5 1.12 1.18 1.25Book value per share 2.74 2.72 2.28 2.33 2.2 2.46 5.8 2.60 2.74 2.86Average shares (diluted) 757.83 760.76 762.97 765.09 0.3 768.09 0.4 771.09 774.09 777.84

Balance sheet (A$m) 12/11 12/12 12/13 12/14E % ch 12/15E % ch 12/16E 12/17E 12/18ETangible fixed assets 1,772 1,994 2,062 2,119 2.8 2,196 3.6 2,334 2,459 2,568Intangible fixed assets 1,507 1,534 1,265 1,265 0.0 1,265 0.0 1,265 1,265 1,265Investments 0 0 26 26 0.0 26 0.0 26 26 26Other assets 105 263 97 97 0.0 97 0.0 97 97 97Total fixed assets 3,385 3,791 3,450 3,507 1.7 3,584 2.2 3,722 3,847 3,956Net working capital 699 355 351 413 17.7 455 10.3 484 508 531Cash 665 1,178 1,426 1,100 -22.9 1,100 0.0 1,100 1,101 1,101Short term debt (107) (351) (731) (480) 34.3 (492) -2.4 (548) (582) (594)Long term debt (2,202) (2,436) (2,377) (2,377) 0.0 (2,377) 0.0 (2,377) (2,377) (2,377)Preferred shares 0 0 0 0 - 0 - 0 0 0Net (debt) / cash (1,644) (1,609) (1,682) (1,758) -4.5 (1,769) -0.7 (1,825) (1,859) (1,871)Other debt-deemed liabilities 0 0 0 0 - 0 - 0 0 0Provisions & non-debt deemed liabs (405) (458) (378) (378) 0.0 (378) 0.0 (378) (378) (378)Total equity 2,034 2,079 1,740 1,784 2.5 1,892 6.0 2,002 2,118 2,237Minority interests 0 (5) (6) (7) -19.4 (9) -16.2 (10) (11) (12)Common s/h equity 2,034 2,073 1,734 1,777 2.5 1,883 6.0 1,993 2,107 2,225Operating invested capital 3,679 3,688 3,396 3,515 3.5 3,635 3.4 3,801 3,950 4,082Total capital employed 3,679 3,688 3,422 3,542 3.5 3,661 3.4 3,828 3,977 4,108

Cash flow (A$m) 12/11 12/12 12/13 12/14E % ch 12/15E % ch 12/16E 12/17E 12/18ENet income (before pref divs) 592 460 80 515 544.5 532 3.3 547 570 593Depreciation & amortisation 205 233 252 269 7.0 290 7.9 317 346 378Net change in working capital 57 39 30 (99) - (41) 58.4 (40) (40) (38)Other operating - - 371 (3) - 6 - 5 7 6

Operating cash flow 642 742 733 681 -7.1 787 15.5 829 883 940

Tangible capital expenditure (358) (137) (391) (351) 10.5 (367) -4.7 (454) (471) (520)Intangible capital expenditure (12) (116) 0 0 - 0 - 0 0 0Net (acquisitions) / disposals 0 0 0 0 - 0 - 0 0 0Other investing (5) (125) 150 (3) - (6) - (6) (6) (6)

Investing cash flow (375) (378) (241) (354) -46.4 (373) -5.6 (460) (477) (526)

Equity dividends paid (379) (414) (473) (449) 5.1 (426) 5.2 (438) (456) (473)Share issues / (buybacks) 201 44 (339) 44 - 108 142.7 111 115 120Other financing 186 518 563 (247) - (95) 61.47 (42) (64) (92)Change in debt & pref shares - - - - - - - - - -Financing cash flow - - - - - - - - - -Cash flow inc/(dec) in cash - - - - - - - - - -FX / non cash items - - - - - - - - - -Balance sheet inc/(dec) in cash 280 513 248 (326) - 0 - 0 0 0Source: Company accounts, UBS estimates. (UBS) metrics use reported figures which have been adjusted by UBS analysts.1Cash EPS (UBS, diluted) is calculated using UBS net income adding back depreciation and amortization.

UBS 53


Coca-Cola Amatil Limited (CCL.AX)

Valuation (x) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18EP/E (local GAAP, diluted) 15.0 21.4 NM 16.7 16.2 15.8 15.2 14.7P/E (UBS, diluted) 16.6 17.6 19.8 16.7 16.2 15.8 15.2 14.7P/CEPS 12.0 12.4 13.2 10.9 10.5 10.0 9.5 9.0Equity FCF (UBS) yield % 3.3 6.2 3.4 3.9 4.9 4.4 4.8 4.9Net dividend yield (%) 4.5 4.6 4.5 5.2 4.9 5.1 5.3 5.4P/BV x 4.3 4.7 5.7 4.8 4.6 4.3 4.1 3.9EV/revenues (core) 2.1 2.2 2.3 1.9 1.9 1.8 1.7 1.7EV/EBITDA (core) 9.6 10.0 10.7 9.3 8.9 8.6 8.2 7.8EV/EBIT (core) 11.8 12.6 14.0 12.3 11.9 11.7 11.3 10.9EV/OpFCF (core) 12.1 14.5 13.2 11.2 12.7 11.7 9.4 10.6EV/op. invested capital 2.4 2.5 2.7 2.5 2.4 2.3 2.3 2.2

Enterprise value (A$m) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18EMarket cap. 8,669 9,691 9,950 8,567 8,567 8,567 8,567 8,567Net debt (cash) 1,614 1,609 1,683 1,758 1,769 1,825 1,859 1,871Buy out of minorities 0 5 6 7 9 10 11 12Pension provisions/other 0 0 0 0 0 0 0 0

Total enterprise value 10,283 11,306 11,639 10,332 10,345 10,402 10,437 10,451Non core assets 0 0 0 0 0 0 0 0

Core enterprise value 10,283 11,306 11,639 10,332 10,345 10,402 10,437 10,451

Growth (%) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18ERevenue 5.4 5.8 -1.1 5.1 4.5 4.0 3.6 3.2EBITDA (UBS) 3.6 5.1 -3.9 2.1 4.4 4.3 5.3 5.0EBIT (UBS) 2.8 3.1 -6.9 0.7 3.3 2.7 3.8 3.5EPS (UBS, diluted) 4.5 4.6 -10.3 2.1 2.9 2.5 3.8 3.4Net DPS 8.2 13.3 -1.7 0.3 -5.6 2.5 3.8 3.5

Margins & Profitability (%) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18EGross profit margin - NM NM NM NM NM NM -EBITDA margin 22.1 22.0 21.3 20.7 20.7 20.8 21.1 21.5EBIT margin 17.9 17.4 16.4 15.7 15.5 15.3 15.4 15.4Net earnings (UBS) margin 11.0 10.9 9.9 9.6 9.5 9.4 9.5 9.5ROIC (EBIT) 20.1 19.7 19.0 19.9 20.0 19.9 20.0 20.0ROIC post tax 14.4 14.0 13.5 14.1 14.2 14.1 14.2 14.7ROE (UBS) 27.5 27.2 26.4 29.3 29.1 28.2 27.8 28.9

Capital structure & Coverage (x) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18ENet debt / EBITDA 1.5 1.4 1.6 1.6 1.5 1.5 1.5 1.4Net debt / total equity 80.8 77.4 96.7 98.5 93.5 91.1 87.8 83.6Net debt / (net debt + total equity) 44.7 43.6 49.2 49.6 48.3 47.7 46.7 45.5Net debt/EV 16.0 14.2 14.5 17.0 17.1 17.5 17.8 17.9Capex / depreciation % 193.1 64.5 172.8 144.8 139.5 156.7 147.6 148.0Capex / revenue % 7.4 2.7 7.7 6.6 6.6 7.8 7.8 8.4EBIT / net interest 6.8 8.0 6.7 7.5 7.5 7.6 7.8 8.0Dividend cover (UBS) 1.3 1.2 1.1 1.1 1.3 1.3 1.3 1.2Div. payout ratio (UBS) % 74.8 81.0 88.8 87.2 80.0 80.0 80.0 80.1

Revenues by division (A$m) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18EAustralia 2,911 2,958 2,958 3,003 3,093 3,171 3,250 3,331Indonesia & PNG 847 950 923 912 996 1,086 1,185 1,263Food Services 673 738 742 905 954 997 1,020 1,043Pacific 426 412 461 520 538 552 563 574South Korea 0 0 0 0 0 0 0 0Others 0 81 0 0 0 0 0 0

Total 4,856 5,139 5,084 5,341 5,582 5,806 6,017 6,211

EBIT (UBS) by division (A$m) 12/11 12/12 12/13 12/14E 12/15E 12/16E 12/17E 12/18EAustralia 607 621 566 571 582 590 611 633Pacific 80 70 83 94 98 102 105 107Food Services 93 95 93 91 96 99 100 101Indonesia & PNG 88 103 92 82 90 98 107 114South Korea 0 0 0 0 0 0 0 0Pacific Beverages - 0 0 0 0 0 0 0Others 1 6 0 0 1 1 1 1

Total 869 896 833 839 866 890 924 956Source: Company accounts, UBS estimates. (UBS) metrics use reported figures which have been adjusted by UBS analysts.

UBS 54


Forecast returns

Forecast price appreciation +1.2%

Forecast dividend yield 5.0%

Forecast stock return +6.2%

Market return assumption 7.5%

Forecast excess return -1.3%

Statement of Risk

Exchange rate, political and economic risks associated with trading in Indonesia, PNG and New Zealand; changes in commodity prices especially sugar, aluminium and plastic resin; potential acquisition appetite of management; pricing pressure from competitors and a consolidated consumer base.

UBS 55

Coca-Cola Amatil Limited 18 February 2014 11

Required Disclosures

This report has been prepared by UBS Securities Australia Ltd, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS.

For information on the ways in which UBS manages conflicts and maintains independence of its research product; historical performance information; and certain additional disclosures concerning UBS research recommendations, please visit www.ubs.com/disclosures. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results. Additional information will be made available upon request. UBS Securities Co. Limited is licensed to conduct securities investment consultancy businesses by the China Securities Regulatory Commission.

Analyst Certification: Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were prepared in an independent manner, including with respect to UBS, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.

UBS Investment Research: Global Equity Rating Definitions

UBS 12-Month Rating

Definition Coverage1IB Services2

Buy FSR is > 6% above the MRA. 44% 36%Neutral FSR is between -6% and 6% of the MRA. 45% 35%Sell FSR is > 6% below the MRA. 11% 23%

UBS Short-Term Rating

Definition Coverage3IB Services4

BuyStock price expected to rise within three months from the time the rating was assigned because of a specific catalyst or event.

less than 1%

less than 1%

SellStock price expected to fall within three months from the time the rating was assigned because of a specific catalyst or event.

less than 1%

less than 1%

Source: UBS. Rating allocations are as of 31 December 2013.1:Percentage of companies under coverage globally within the 12-month rating category. 2:Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. 3:Percentage of companies under coverage globally within the Short-Term rating category. 4:Percentage of companies within the Short-Term rating category for which investment banking (IB) services were provided within the past 12 months.

KEY DEFINITIONS: Forecast Stock Return (FSR) is defined as expected percentage price appreciation plus gross dividendyield over the next 12 months. Market Return Assumption (MRA) is defined as the one-year local market interest rate plus 5% (a proxy for, and not a forecast of, the equity risk premium). Under Review (UR) Stocks may be flagged as UR by the analyst, indicating that the stock's price target and/or rating are subject to possible change in the near term, usually in response to an event that may affect the investment case or valuation. Short-Term Ratings reflect the expected near-term (up to three months) performance of the stock and do not reflect any change in the fundamental view or investment case. Equity Price Targets have an investment horizon of 12 months.

EXCEPTIONS AND SPECIAL CASES: UK and European Investment Fund ratings and definitions are: Buy: Positive on factors such as structure, management, performance record, discount; Neutral: Neutral on factors such as structure, management, performance record, discount; Sell: Negative on factors such as structure, management, performancerecord, discount. Core Banding Exceptions (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment Review Committee (IRC). Factors considered by the IRC include the stock's volatility and the credit spread of the respective company's debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating. When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece.

Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not registered/qualified as research analysts with the NASD and NYSE and therefore are not subject to the restrictions contained in the NASD and NYSE rules on communications with a subject company, public appearances, and trading securities held by a research analyst account. The name of each affiliate and analyst employed by that affiliate contributing to this report, ifany, follows.

UBS Securities Australia Ltd: Craig Stafford, CFA; Ben Gilbert.

Coca-Cola Amatil Limited 18 February 2014 12

Company Disclosures

Company Name Reuters 12-month rating Short-term rating Price Price date

Coca-Cola Amatil Limited4, 5, 16, 18 CCL.AX Neutral N/A A$11.85 17 Feb 2014

Source: UBS. All prices as of local market close.Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing date

4. Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking services from this company/entity.

5. UBS AG, Australia Branch or an affiliate expect to receive or intend to seek compensation for investment banking services from this company/entity within the next three months.

16. UBS Securities LLC makes a market in the securities and/or ADRs of this company.18. UBS AG, Australia Branch is acting as Adviser and Broker in relation to Coca Cola Amatil Ltd's neutralisation of its

DRP, and will receive a fee for acting in this capacity.

Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report.

Coca-Cola Amatil Limited (A$)

01

-Jan

-09

01

-Ap

r-0

9

01

-Ju

l-0

9

01

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-09

01

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-10

01

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r-1

0

01

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l-1

0

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-11

01

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r-1

1

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l-1

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-11

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-12

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-13

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-14

0.0

5.0

10.0

15.0

20.0

Price Target (A$) Stock Price (A$)

NeutralSell

No Rating

Source: UBS; as of 17 Feb 2014

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CCL 190214