INDUSTRY CHANGE

DSO 10.3 ⇓

DIO 1.2 ⇑

DPO 2.5 ⇓

DWC 9.3 ⇓

Largest reduction in DWC driven by lower DSO, with good inventory management in H2 in response to the impact of COVID-19.

The Food & Beverage sector has held up better than most during COVID-19. This is evidenced by an average increase in revenue and EBITDA for our sampled companies of 9.8% and 10.5%, respectively during 2020. Close to 50% of the sample achieved both top-line and earnings growth, as businesses benefited from “panic buying” for food staples during the early stages of the pandemic and consumers shifted to online food delivery services.

From a working capital perspective, the average DWC across the sample of Food & Beverage companies decreased by 9.3 days to 66.8 days in 2020, releasing $300 million in cash. This was driven by a 10.3 day reduction in average DSO. There was some offsetting shortening of supplier payment cycles with 71% of the companies who collected more quickly also paying their suppliers more quickly (particularly in H2). Average DPO decreased by 2.5 days to 66 days in 2020.

Notwithstanding the above, inventory management remains key to working capital performance for Food & Beverage companies. DIO increased by 1.2 days (to 118.7 days) with 88% of sampled companies holding two months or more of stock. The majority of sampled companies were able to deliver improvements in both DSO and DIO during H2, as management teams leveraged the spike in demand to lock in shorter payment arrangements with their customers and reduce inventory levels during the COVID-19 period. Average DIO was reduced by over a week during H2.

From an international perspective, the average DWC of our sampled companies was higher than all other regions with inventory the main differentiator. Asian, EU and US companies held at least two months less inventory than their Australian counterparts in 2020.

Looking forward, the growth prospects for many Food & Beverage companies will depend on the continued lifting of restrictions around hospitality, food services and exports. Consumers are also likely to seek out products with natural ingredients driven by the trend toward healthier eating habits.

“…strong working capital management across all markets, driven by improved debtor collection and inventory management.”

Operating & Financial Review
Coca-Cola Amatil Limited
HY 2020 Report

COVID-19 IMPACT

COVID-19 Impact

Net working capital performance

2019
2020
Cash Impact*

*A positive cash impact is a “release” of cash from working capital (improvement). A negative cash impact is additional cash invested or “locked up” in working capital (deterioration).

Food & Beverage - Financial Year
Days 2019 2020 Change
DSO 43.9 33.6 (10.3)
DIO 117.5 118.7 1.2
DPO 68.5 66.0 (2.5)
DWC 76.1 66.8 (9.3)
Food & Beverage - Half Year
Days H1 2020 H2 2020 Change
DSO 40.4 34.0 (6.4)
DIO 136.5 126.9 (9.6)
DPO 81.4 66.4 (15.0)
DWC 79.6 69.1 (10.5)
Best & Worst
Days Best Worst Spread
DSO 7.6 69.3 61.7
DIO 12.8 235.4 222.6
DPO 121.6 34.7 (86.9)
DWC (10.6) 175.6 186.2
International Benchmarking
Days Asia EU US
DSO 41.3 37.8 28.7
DIO 63.0 46.1 52.8
DPO 52.9 68.5 60.3
DWC 51.4 18.1 26.1