Coca-Cola Amatil slides as market loses taste for RI

Coca-Cola Amatil slides as market loses taste for RI

Dow Jones, Sydney

Shares in Australia's Coca-Cola Amatil Ltd. have fallen for a
third straight session as the market continues to assess the
implications of the Bali bombings for its Indonesia business.

Although the Sydney-based soft drink maker said Wednesday that
Bali is an immaterial component of overall earnings and
reaffirmed 2002 profit forecasts, the market is concerned what
impact Bali will have on the broader Indonesian economy, said
brokers.

And as the company adjusts to a bigger risk premium due to its
Indonesian operation, some investors have been prepared to quit
the stock altogether to avoid all Indonesian exposure, they said.

On the Australian Stock Exchange, C-C Amatil shares fell nine
cents, or 1.7 percent to close at A$5.25 Wednesday. The share
price has lost 5.1 percent so far this week.

Indonesia accounts for around 11 percent of sales, 5 percent
of earnings before interest and tax, and 9 percent of net assets
at C-C Amatil, ranking it fourth in size behind the company's
operations in Australia, Oceania and South Korea.

UBS Warburg, one of several brokers to lower its valuation of
C-C Amatil, admits it is "highly speculative" to judge so soon
how serious the impact of the Bali bombings may be on the
Indonesian economy. But the negative outlook and the possibility
of further currency devaluation led the broker to increase its
risk premium on the business.

While the company hedges its raw material costs, it doesn't
hedge earnings from Indonesia or any other market.

Inbound tourism accounts for 3.0 percent of Indonesia's gross
domestic product, with Bali accounting for about 36percent of
total tourism or 1percent of GDP, the broking house noted.

"While CCL stated that Bali represents a small part of their
sales in the region, the economic impact on Indonesia from these
lost receipts will obviously be felt throughout the economy in
the form of reduced growth," it said.

UBS Warburg cut its valuation C-C Amatil shares by 12percent
to A$5.60 and its price target by 14 percent to A$5.72. Its
recommendation on the stock is "hold."

J.B. Were has cut its forecasts and short-term recommendation
following Saturday's bomb blasts, which killed more than 180
people and injured hundreds more.

Since the bombings, the Indonesian rupiah has fallen about
2.5percent in value against the U.S. dollar.

C-C Amatil told the market that the direct impact of the Bali
tragedy on its total business "isn't material" as the island
represented less than 5percent of Indonesian EBIT in the first
half of 2002.

"The company's previous expectation was that consumer
confidence in Indonesia would remain low for the next six-to-
twelve months," it said. Although Indonesian EBIT in the second
half is expected to be down on the first half, C-C Amatil
reiterated that net profit growth for the company in 2002 is
still expected to be toward the top end of a 10percent-15percent
target.

This is due to "solid trading conditions" in other markets, it
said.