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Edited Transcript of CCL.AX earnings conference call or presentation 22-Aug-18 12:00am GMT

Half Year 2018 Coca-Cola Amatil Ltd Earnings Presentation

Sydney Sep 5, 2018 (Thomson StreetEvents) -- Edited Transcript of Coca-Cola Amatil Ltd earnings conference call or presentation Wednesday, August 22, 2018 at 12:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alison Mary Watkins

Coca-Cola Amatil Limited - Group MD & Executive Director

* David Akers

Coca-Cola Amatil Limited - Group Head of IR

* Martyn J. Roberts

Coca-Cola Amatil Limited - Group CFO

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Conference Call Participants

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* Adam Fleck

Morningstar Inc., Research Division - Director of Consumer Equity Research & Regional Director

* Andrew J. McLennan

Goldman Sachs Group Inc., Research Division - Consumer and Retail Analyst

* Ben Gilbert

UBS Investment Bank, Research Division - Executive Director and Analyst

* Craig John Woolford

Citigroup Inc, Research Division - MD and Head of Australian Consumer Research Team

* David Errington

BofA Merrill Lynch, Research Division - Head of Consumer Research for Australia and Asia

* Larry Gandler

Crédit Suisse AG, Research Division - Director

* Michael Simotas

Deutsche Bank AG, Research Division - Research Analyst

* Morana Hunter

Macquarie Research - Research Analyst

* Richard Barwick

CLSA Limited, Research Division - Research Analyst

* Shaun Robert Cousins

JP Morgan Chase & Co, Research Division - Senior Analyst

* Thomas Kierath

Morgan Stanley, Research Division - Executive Director

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Presentation

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David Akers, Coca-Cola Amatil Limited - Group Head of IR [1]

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Good morning, everyone. Thank you for joining the conference call and webcast. This is David Akers, Group Head of Investor Relations. On the call this morning, we have Alison Watkins, our Group Managing Director; and Martyn Roberts, our Group Chief Financial Officer.

Slide 2 is just to draw your attention to our disclaimer.

Turning to Slide 3, the agenda for this morning. Alison will present the 2018 half year result overview, including how we're tracking against our shareholder value proposition. Alison will also provide a summary of additional recent developments and some leadership updates. Martyn will take you through the performance of each of our business units in more detail and provide an overview of the group financials. And Alison will then provide a quick update on our strategy and a number of progress updates with concluding remarks on our outlook. As always, there'll be time for questions at the end.

I'll turn the call over to Alison.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [2]

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Thank you, David. Good morning, everyone. Thank you for joining the call. As David noted, I'll start by taking you through the group performance.

Today, we have reported our results for the first half of 2018. We've delivered an increase in earnings per share of 17.8% on a statutory basis. On an underlying basis, EPS declined 1.6%. Our group statutory net profit after tax was also up 12.8% to $158.1 million, while, on an underlying basis, NPAT declined 5.9% to $178.8 million. Our statutory EBIT was up 6.6% at $257.2 million, while, on an underlying basis, it declined 4.9% to $297.5 million.

A few points I'd like to note for each of our businesses. Our result includes an excellent performance in New Zealand and a strong performance in Fiji and we're delighted with this result. We're pleased to highlight some encouraging signs in Australian Beverages, where we've delivered revenue growth and improved our volume trajectory in both Sparkling and Still Beverages. It's also important to note that our earnings performance in Australian Beverages is consistent with our plans to accelerate the reinvestment of our cost-saving initiatives in 2018.

In Indonesia, the market has been soft, and our business has being impacted as a result. We've continued to deliver efficiency savings. However, this has not been sufficient to deliver EBIT growth for the period.

In Papua New Guinea, we cycled the preelection stimulus in the first half of 2017 and also experienced some operational issues, which are being rectified.

We're very pleased with our performance in Alcohol & Coffee, with double-digit EBIT growth in our core business, funding investments in growth initiatives.

Earnings in our Corporate, Food & Services segment has declined. This reflects a number of movements such as a modest loss in SPC, lower earnings in our property division and the investment we've made in Amatil X and group capabilities.

We've declared a dividend of $0.21 per share, unchanged from the first half in 2017. This represents a payout ratio of 85% on an underlying basis. The dividend will be franked at 65%.

We've also announced today the commencement of a strategic review of growth options for SPC, Australia's leading fruit and vegetable processor. I'll provide more detail on this shortly.

Our shareholder value proposition summarizes our financial targets and shapes the plans within our businesses. It's the lens through which we view our performance. On Slide 7, we show how we're tracking.

Since 2014, we've made solid progress against many of our targets and still have more to do. We're confident in the plans we have in place, which are outlined in our results materials.

There are a few call-outs here, and it's important to note, this is a half year result. We have a strong plan in Australian Beverages, and we're gaining traction. We want to turn that amber into green through delivery of our Accelerated Australian Growth Plan, improved prioritization and with a strong leadership team. Unfortunately, Indonesia is amber here as well, largely due to continued softness in the market. However, we've been delighted over the past few years how our accelerate to transformed strategy has improved efficiency in our Indonesian business. We're poised to capture a significant growth here when market conditions improve. We're also working hard with The Coca-Cola Company to develop additional initiatives to enhance our readiness for future growth.

We're pleased with how New Zealand, PNG, Fiji and Alcohol & Coffee are tracking. We're paying good dividends with strong balance sheet and return on capital. And we're confident in our plans to return to mid-single-digit EPS growth in the medium term.

Earlier today, we announced a strategic review of growth options for SPC. This review coincides with the completion of a 4-year, $100 million co-investment in SPC, in conjunction with the Victorian government, which included $22 million by the Victorian government and $78 million by Coca-Cola Amatil. With this investment, we kept SPC operating, invested in modernizing the plant and creating new business opportunities. Outcomes of the co-investment include new tomato and high-speed snack lines and a new aseptic fruit processing system. SPC has also taken the opportunity to explore additional export markets, including through a partnership with China State Farms to sell premium packaged fruit into that market. We believe there are many opportunities for further growth in SPC. This may include new products and markets, further efficiency improvements and technology and intellectual property. The review will look at how this growth can be unlocked, potentially through a change in ownership, alliances or mergers.

We've also announced a minority stake in the company, Doshii, which is our first investment through Amatil X. Doshii is a platform designed to assist RECA businesses managing multiple ordering, payment loyalty and reservation applications.

We remain focused on having a positive impact in the communities where we operate as well as consumer well-being and environmental performance. We're very pleased to report our progress in the first half of the year in relation to both consumer well-being and environment.

On well-being, we committed to reducing the sugar content across our NARTD portfolio by 10% by 2020 and 20% by 2025 in Australia. I'm very pleased to report that together with our partner, The Coca-Cola Company, we have so far achieved a reduction of around 5% and are on track to meet the overall pledge. The reduction has been achieved through a program of reformulations, increased focus on smaller pack sizes and mixed shift to low- and no-kilojoule options.

On packaging, we've ensured our standard bottles and cans are 100% recyclable in Australia and New Zealand. And in this half, we've delivered our first mainstream products made of 100% recycled materials: the 400 ml, 500 ml and 600 ml Mount Franklin recycled PET bottles.

As outlined in our sustainability report, we aspire now to an average 50% recycled PET across our entire NARTD range, and we're making good progress in this regard.

I mentioned our plans for Australian Beverages growth. Those plans are being delivered by some of Australia's most experienced beverage industry leaders, including 2 recent appointments: Peter West as Managing Director of Australian Beverages and Steve Paddis as Chief Financial Officer.

The Coca-Cola Company has also made some important leadership changes in Coca-Cola South Pacific with the appointments of Vamsi Mohan and Lucy Austin to the central roles of President and Marketing Director, respectively.

I'll hand over to Martyn.

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [3]

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Thank you, Alison, and good morning, everybody. I'll now take you through an overview of how our businesses have performed and an overview of our group financials.

Starting on Slide 11. Once again, our result demonstrates the strength of a diverse portfolio. In Australian Beverages, we stabilized revenue and volume as a result of customer initiatives and the investments we are making in our Accelerated Australian Growth Plan. While there's more to be done, we are pleased with the progress.

The overall earnings performance is consistent with our plans to accelerate reinvestment in 2018 as well as a negative volume impact from the New South Wales container deposit scheme.

Trading revenue per case was 1.1% higher than the prior corresponding period, and this comprised of a 4.1% increase from charges related to 2 container deposit schemes, a 2.2% investment in realized price and an 0.8% decrease from change in product and channel mix.

We also need to highlight that EBIT benefited from a $10 million credit due to New South Wales container redemptions coming in below forecast. As we've consistently said, we are not seeking the profit from the container deposit scheme and are working with our customers to evaluate opportunities such as additional promotions and discounts to better reflect the actual redemptions experienced in the early stages of the scheme in New South Wales. This commenced in the first half, and in the second half, we will ensure this $10 million credit is returned to New South Wales consumers through these price mechanisms.

The next slide sets out our volume composition by category. This is our best half-on-half total volume result in 3 years, driven by improvements in both Sparkling and Still Beverages. In fact, if you exclude frozen, overall volume growth would have been positive for the half.

We are stabilizing the core with volume growth in low and No Sugar cola and the continued strong performance of Coca-Cola No Sugar. In fact, brand Coca-Cola overall was in positive year-on-year growth at the end of July.

Water and sports grew in the half, and we also delivered strong growth in our double-down growth areas of energy, adult sparkling and value-added dairy.

From a channel perspective, we achieved growth in grocery and petrol and convenience, and as a result of our strategic focus in RECA, we also delivered growth in that important channel as well.

Next, a few call-outs on container deposit schemes. The New South Wales container deposit scheme had a negative impact on volumes in the half. New South Wales volumes were down 1.6% compared to other states, which increased 0.3%. We reduced our CDS charge in New South Wales in August, to reflect lower than anticipated redemptions. And from an accounting perspective, we had been incurring unredeemed deposits on our balance sheet. At the half year, we have been required to take $10 million of this to the income statement. However, this amount is being returned to consumers through price investments in the second half.

In terms of other states, ACT, CDS commenced in June. Queensland is targeting 1st of November, and Western Australia will follow in early 2020.

New Zealand had an excellent half. We're really delighted with how we're going across the ditch. And we achieved revenue, volume and earnings growth, continuing the strong momentum from 2017.

We're again following well in Sparkling and Stills and in all major channels. During the half, we launched Coca-Cola Stevia No Sugar, which is sweetened with 100% stevia. New Zealand is the first country in the world to launch this product.

The team in New Zealand was also awarded the prestigious Aon Hewitt Best Employer Accreditation for the third year in a row and was a close runner-up in The Coca-Cola Company's Candler Cup, which is their worldwide competition for outstanding bottler execution.

In Fiji, we delivered revenue, volume and EBIT growth despite a number of unfavorable weather events during the half.

In this half, we've reported low single-digit earnings growth in constant currency for our Indonesia & PNG segment. This comes off a period of strong growth and reflects current weakness in the Indonesian market. We've continued to deliver on our strategy of transforming the business. This includes cost efficiencies, combined with further investment in manufacturing and cold drink equipment and the rollout of our route-to-market model.

In Papua New Guinea, we've delivered pleasing EBIT growth despite some operational issues and the cycling of favorable economic conditions in the first half of 2017.

Alcohol & Coffee continues to perform well, with revenue and volume growth across both product ranges and a particularly strong performance in the spirits and premix. The standout highlight for the half was the performance of Canadian Club.

We've delivered double-digit EBIT growth in the core business, which has allowed us to invest for the future and some strategic growth initiatives. And we're pleased to announce today that we have recently been granted the exclusive master supply agreement for the sale and distribution of the Caffitaly coffee machine and capsule system for Australia, another exciting step in the long-term growth of our coffee business.

Regarding Corporate, Food & Services. The EBIT contribution for this segment is lower than the prior corresponding period. This resulted from a modest loss for SPC, lower earnings in the property division, investment in our Amatil X program and increased capabilities in group [offers].

Now moving on to the group financials. On Slide 20, the income state summary, a few call-outs here. Underlying EBIT decline of 4.9%, which reflects our accelerated investment in Australian Beverages, softer market conditions in Indonesia and a lower contribution from Corporate, Food & Services.

Net finance costs were slightly higher, reflecting higher net debt as a result of the completion of our 2017 share buyback. Our underlying effective tax rate was 28.7%, with a slightly higher mix of earnings from overseas. And non-trading items were $20.7 million for the half, lower than last year due to last year's announcement of the closure of our Thebarton plant.

Our return on capital employed continues to be strong at 20.3%. However, working capital increased, driven by Indonesia extending credit to drive sales during Ramadan, which had not been collected at the end of the half; a temporary stock buildup in Australia ahead of the commissioning of new product -- production lines in Richlands; and increased inventory in SPC.

Our CapEx was higher than the first half of 2017, in line with our plans and reflecting progress on additional production and warehouse projects at Richlands in Queensland and expansions in Indonesia and New Zealand.

Free cash flow has been affected by our investment for growth at Richlands and a high level of working capital at the end of the period, as already discussed. Cash realization is also, therefore, lower than the comparative period due to the higher working capital. Cash realization is usually lower in the first half due to the seasonality of our business.

Our balance sheet is strong. Net debt is sitting at $1.5 billion. This is higher than the prior corresponding period, primarily due to the share buyback which was completed in 2017.

Underlying EBIT interest cover remained strong at 8.2x.

So in summary, statutory NPAT up 12.8% and EPS up 17.8%. Return on capital employed was strong again at 20.3%. We continue to invest in the infrastructure of our business. And despite lower than expected cash realization, we continue to have a very strong balance sheet.

And with that, I'll turn the call back over to Alison.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [4]

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Thanks, Martyn. I'd like to take a few minutes to touch on a few of the encouraging signs in Australian Beverages.

This slide summarizes our accelerated Australian Growth Plan, which we first showed you at the Investor Day in November last year. I'm pleased to say we're making good progress against this plan.

In the half, we performed well in cola, water and sports. We've worked with The Coca-Cola Company to increase the frequency of flavors. Raspberry proved very popular with consumers and is our most successful flavor to date.

In cola, Coca-Cola No Sugar continues to grow. We've just launched Coca-Cola Orange No Sugar and Coca-Cola Vanilla No Sugar. As Martyn pointed out earlier, brand Coca-Cola was in positive year-on-year growth at the end of July.

In water, our plan is focused on targeted price investment to maintain competitiveness, wider distribution of enhanced water products and continued innovation in product development. These are good building blocks for the future of this portfolio, and we have more to roll out in the second half.

We've also put more targeted investment into the sports category with some encouraging results.

While cola and water are the largest and most -- highest priority components of our core portfolio, we continue to progress our plans in flavors, tea and juice. We're making good progress in our double-down growth areas. Value-added dairy, energy and adult sparkling have all launched new products, supported by strong execution. In value-added dairy, we've bolstered our growth plans by investing in significant above-the-line advertising.

We're making good progress in grocery, petrol and convenience and RECA but have more to do in immediate consumption. That said, we were delighted to achieve a number of customer renewals, including Hungry Jacks, Red Rooster and Oporto. These major, long-term partnerships are great building blocks for Australian Beverages growth.

In 2018, we are targeting to deliver approximately $35 million of cost savings from our cost optimization program. We're on track to deliver this with approximately half of this being achieved in the first half.

Additionally, as part of our accelerated growth plan, we've also previously indicated we'll invest a further $40 million in the business in 2018 in price, marketing, execution, cold drink equipment and digital technology. We do not expect to have cost savings to offset this additional investment in 2018. The additional investment is also on track, with approximately half being invested during the period.

Our outlook is broadly consistent with what we presented at the full year results in February and at the Annual General Meeting in May. We expect New Zealand & Fiji and Alcohol & Coffee to continue to deliver growth in line with the shareholder value proposition.

Group near-term earnings will be negatively impacted by accelerated reinvestment of approximately $40 million of cost savings in Australia in 2018, the uncertain impact of container deposit schemes in Australia and soft market conditions in Indonesia.

We remain committed to our shareholder value proposition, targeting a return to the delivery of mid-single-digit earnings per share growth in the medium term. As we've said for some time, this will depend on the success of revenue growth initiatives in Australia, Indonesian economic factors and regulatory conditions in each of our markets.

We're expecting total one-off costs in 2018 of approximately $50 million. As part of our property strategy, taking a group-wide approach to optimizing our property arrangements in assets, we are pursuing additional opportunities, which we anticipate may result in one-off gains in 2018 and would be recognized in nontrading items.

Group CapEx in 2018 is expected to be around about $400 million, weighted to the second half. We're continuing to target a medium-term dividend payout ratio of over 80%. Our balance sheet is expected to remain conservative, with flexibility to fund future growth opportunities.

We expect to maintain a strong return on capital employed and will continue exploring opportunities to extract value from our property portfolio.

With that, we'd be happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

The first question is from Michael Simotas from Deutsche Bank.

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Michael Simotas, Deutsche Bank AG, Research Division - Research Analyst [2]

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First question from me is on the container deposit scheme, just trying to understand the workings of that a little bit better. Martyn, I think you said that there is still an amount sitting on the balance sheet over and above the $10 million benefit you've taken to P&L. Can you just give us a little bit of color on how large that is and how that's likely to flow through in the second half?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [3]

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Yes, thanks, morning, Michael. So yes, the $10 million we've taken to the P&L, we see as temporary if you like. So as you know, we've been charging customers what we thought the charges from the scheme would be and holding the difference between what we've been invoiced on the balance sheet. But our intention has always been to return that money back to consumers because we never plan to profit from this scheme. So we've actually reinvested some of that money already in the first half in additional consumer promotions in New South Wales. That was about $4 million. We've taken $10 million to the P&L because you can't have an accrual to consumers if you like. I mean you can imagine over the winter months, it's been more challenging to come up with large enough promotions to actually spend that money. We do plan to spend that as we move towards summer. There is an amount left on the balance sheet which is representative of a number of things: firstly, what we estimate to be the containers that are in the system that were sold in the first half but yet to be redeemed, either in consumers' hands or in MRF's hands; and then also we've held a small amount back for any retrospective claims that any of the MRFs might bring to us in relation to the first half. It's still -- there's still a bit of catch-up to be done through the scheme. That amount is still sitting on the balance sheet is immaterial, reasonably small.

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Michael Simotas, Deutsche Bank AG, Research Division - Research Analyst [4]

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Okay, but there's nothing on the balance sheet that will be redeployed into promotion?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [5]

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No. The $10 million credit that we've put through, that will be redeployed into promotions in the second half.

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Michael Simotas, Deutsche Bank AG, Research Division - Research Analyst [6]

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Yes, okay. And then while we're on this, can we talk about the cash flow impacts of this as well? I would have thought that there should be an operating cash flow benefit, given you're collecting money ahead of redeploying it.

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [7]

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There is, but as we've called out, we've had some negatives as well that are probably a bit more material, to be honest, in terms of credit that we've extended in Indonesia. What I can say about that one is, as we sit here today, those credit levels are back to normal in Indonesia. That was a temporary extension of credit to try and drive sales through Ramadan. And we also had a bit of a buildup in SPC inventory, given the slow sales there. So...

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Michael Simotas, Deutsche Bank AG, Research Division - Research Analyst [8]

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Okay. All right. And then just a question on the broader business. Australian volumes, it looks like things looking a little bit better there. Stills, still very strong. How much of that is still water growth versus some of the value-added products like dairy, energy, sparkling water, flavors, et cetera?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [9]

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Well, we don't want to break down the numbers for you. What we can say is that water, we did get some significant volume growth in the half. Quite a different story between New South Wales and outside of New South Wales. So outside of New South Wales, we gained quite a bit of share in grocery and drove a lot of volume growth due to much sharper pricing, which is in line with the strategy that we called out last year. What we have said is that we've had strong growth, so for that rate, sort of high single-digit growth in dairy, in energy and in sports as well.

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Operator [10]

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Your next question is from Shaun Cousins of JPMorgan.

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Shaun Robert Cousins, JP Morgan Chase & Co, Research Division - Senior Analyst [11]

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Just a question on Australian Beverages. In terms of the decline in revenue per case, can you maybe break out what the benefit you got from the container deposit scheme was in revenue per case there? And is this sort of the new level that we need to see revenue per case at to sort of -- I guess, get to volume growth there and contrast that there'll be some tailwinds on the back of the container deposit scheme being introduced in ACT and Queensland going forward? Just some commentary on revenue per case in Australian Beverages, please?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [12]

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Yes. Morning, Shaun. So we called out -- we've tried to help by splitting out the increase in revenue as a result of container deposit scheme charges. That was 4.1%. The 2.2% that we've called out in terms of price investment is really in line with our strategy that we announced last year in November, of investing in price to drive growth. Clearly, we were always going to invest some of our current year's savings in price, but as you know, we've brought forward next year's savings into this year and invested that into price as well. It is a continuous investment going forward. What, where the level is going to land at, I couldn't tell you. We've got Queensland coming in the latter half -- latter part of this year so that will flow-through. But we're always trying to stay competitive, and you don't know what your price is until next week when your competitor wakes up and you're resetting prices again. So we are reasonably comfortable with the investments we've made. They've been very targeted. So yes, it's not been across-the-board. As I said, we've invested in water quite significantly. We've invested in sports. We've invested in certain channels as well. But yes, where it's going to land in the future, I wouldn't know that to tell you.

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Shaun Robert Cousins, JP Morgan Chase & Co, Research Division - Senior Analyst [13]

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No, that's fine. And maybe just a little bit more on, I guess, in terms of some of the volume growth you're getting. So you're on down, down with Mount Franklin with Coles, and you were fighting this time last year with Woolworths. Now you seem to be getting along well with them. And you've also more recently started to sell on Amazon. I'm just sort of curious, how much of the improvement in volume is just some of those sort of targeted changes, either repairing a relationship with a key customer or engaging with some a little more? Or do you think that return to volume growth, particularly ex New South Wales, is actually something that is underlying?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [14]

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I think it's very hard to split those between the 2. I mean, we've said that the volume growth is a result of customer initiatives and accelerated growth plan initiatives. I don't want to get into the detail of how much is from each. But, clearly, both are significant activities and significant contributions. We have a good relationship with Woolworths and Coles at the moment and -- absent impacts of plastic bags and things like that. But we're trading okay and working well with those. Alison, do you want to add something onto that?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [15]

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Yes. Shaun, I'd definitely say I think we are working with our major customers. We've also -- we're delighted with the progress we're making, for example, in RECA, the restaurants and cafés segment, where we've grown our customer numbers significantly. So we are with our major customers really focused on helping them drive category value. And I think there is probably no better example than the water category where with the innovation and the strength of the brands that we can bring, we really see some really good engagement from our customers around putting some value back into that category. So that's our focus. I think with Peter West now leading the Australian Beverages business, he's somebody who's incredibly well regarded in our market and including by our major customers. And he is really leading that strategic and category focus, and it's also very much supported by some changes that we've made around the way that we're working with Coca-Cola South Pacific.

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Shaun Robert Cousins, JP Morgan Chase & Co, Research Division - Senior Analyst [16]

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Great. And just one quick question for you, Martyn. Effective tax rate, how should we think about that on a full year basis, please?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [17]

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How should you think about that on a full year basis?

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Shaun Robert Cousins, JP Morgan Chase & Co, Research Division - Senior Analyst [18]

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Will you continue with 28.7%? I mean, sorry, like the low 30s? Is that something that we should expect or...

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [19]

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Yes. It normally ends up sort of in that high 20s because the Indonesian tax rate is 25%. There's a couple of other lower tax rates so -- as you know, we've called out that earnings affected this year in Australia. So there's less 30% in there and probably more 25%. So it normally ends up around that high 20s and won't be dissimilar to where it's ended at the half, I think it's fair to say.

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Operator [20]

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Your next question is from David Errington from Merrill Lynch.

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David Errington, BofA Merrill Lynch, Research Division - Head of Consumer Research for Australia and Asia [21]

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Alison, Martyn, a couple of questions. The first one, listing to the $10 million. When I first saw that, I thought, "Okay, that's a boost of profitability. It's just a transfer and some profitability." But listening to you, Martyn, that to me is actually a positive that you can use this to reinvest in that second half. And how are you going to do that? Like is this sort of like -- can this replace $10 million that you might have otherwise invested somewhere else? Or are you going to use this as a step-up on what you always were going to invest? I'm just interested as to how you're going to treat this because when I first saw it I thought it was a profit transference. But now listening to you, it's an actual boost that you can use to reinvest, to stimulate your second half growth.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [22]

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Yes. David, no, we're very much focused on working with our customers to reinvest that in a way that flows through to consumers. So it will be on top of the promotional activity that we would have already planned. You're right in the sense that it's a positive, both for our customers and us as well as, obviously, consumers in that it has the potential to stimulate more activity and drive more volumes. So in that sense, there is some positive, which, to some extent, offsets the negative of the volume impact that we've already absorbed through the introduction of the scheme and the price increases that went with that. So it is, though, something that's over and above. Just as we get through this sort of period where the scheme and the level of redemptions settles down and the extent to which we are billed by Exchange For Change, the scheme coordinator starts to match-up. So we're just going through a little bit of a choppy period, hence the mismatch from first half to the second half.

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David Errington, BofA Merrill Lynch, Research Division - Head of Consumer Research for Australia and Asia [23]

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You can certainly use it to your tactical advantage, Alison. That's a good point. Yes.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [24]

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Absolutely. I would say, David, there are also, I mean, it's important -- there are a lot of promotions out there, as we all know already. So the -- making sure that we do actually get an impact and we don't end up in diminishing returns is also our challenge, but we're confident we'll work through that.

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David Errington, BofA Merrill Lynch, Research Division - Head of Consumer Research for Australia and Asia [25]

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Excellent. And Alison, if we look at Page 11, this is sort of like -- when you look at Page 11, you look at the segment results. And it's a pretty -- it's a good slide, really, relative compared to the trading conditions that you're facing, with the exception of that Corporate, Food & Services where you had like $13 million punched out of you there. What's going on there that you had such a heavy drop there? Because if that had been flattish, then you would have -- you had a fair bit of positive news today. But if you look at that Corporate, Food & Services -- so can you spend a bit of time going through -- and also Indonesia. Like when you took us up there last November, I think it was, I think fit for growth was the real mojo up there, and we all saw where you had been investing. It looked like you've put a lot of emphasis, your investment with the Coke Company. It was all very visible, but you were just waiting for volumes to come through, whether it be the authorized dealers to really kick in. What's going to give Indonesia real spark to leverage your asset base? And what are you going to do so you don't get a hole punched through you in Corp? And I know you're talking about doing something with SPC, whether it be selling it or merging it. What can you do there that can actually clean up this part of your portfolio that would otherwise have been a pretty pleasing outcome for you today?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [26]

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Yes. Thanks, David. There's a few questions in there. We might divide and conquer. I'll respond to your question about Indonesia and then also SPC and how we're thinking about this review that we've announced today for SPC. And then Martyn, you might just touch a little bit more on the Corporate, Food & Services. Indonesia, yes, I mean, it was great having everybody up there late last year and being able to sort of show you firsthand the strength of the business that we do have and the very impressive team and the progress. For those of you who visited back in 2013, that was so apparent. So I think you can really see, we've made some very substantial changes. We've got a very -- a much more efficient, lean business. We have built our customer numbers. We've got a lot of equipment out there. We've got a route-to-market model in the CCOD model, which are exclusive distributors, which works very, very well. It's very fit for purpose. So we really are very well-positioned. What we are seeing up there at the moment is we have seen a slowdown. And by, I guess, most standards, a GDP growth rate in excess of 5% would be a healthy one. However, for Indonesia, economists would tell us that it really needs to be somewhere in the 6s or closer to 7% to be generating sufficient growth for that young population to be continuing to improve their standard of living. So we have seen some pressure on consumer spending. And people, obviously, with an absolute low -- relatively low level of income making some choices, unfortunately, away from our categories, which tend to be more discretionary. Now I think we're very encouraged by the initiatives that are going on in Indonesia and the leadership by the government up there, and particularly evident, the huge investment in infrastructure, which is going to be a very positive boost. And we remain absolutely, very confident about the long-term future of Indonesia. So we see this, this softening, as somewhat of a temporary phenomenon. We do also, with our partner, The Coca-Cola Company, share a lot of determination to grow, notwithstanding the environment, because our share overall of nonalcoholic ready-to-drink is relatively small. We know that there are many opportunities for us to grow the sparkling category in particular where we have very high share, but the category overall is still relatively modest. And then we also have opportunities to grow in tea, in juice and in water. So we're working very closely with the Coke Company at the moment to really make sure our understanding of the Indonesian consumer and the positioning of our portfolio is absolutely relevant and driving growth for us even in this somewhat softer environment. So yes, it's a little bit of a bump in the road. I think that we, with our partner, share just a strong determination to continue to build this business from the very solid base that you can see we've got there. Regarding SPC, let me just comment on that briefly. We are very, very confident in the future for SPC. I think the $100 million that we've invested there -- $22 million of which was contributed by the Victorian state government. That investment, over the last 4 years, has been absolutely pivotal in modernizing the Shepparton facility and really setting it up for future growth and success. And we're already seeing the benefits of that, for example, the progress that we're making in the healthcare sector with Provital; the progress we're making in snacking with the snack line capacity; the growth in tomatoes, the share that we've gained in tomatoes with the benefit of a much improved tomato capacity; the deseasonalization of the business. There are many ways that this business is well-positioned to grow. We want to make sure that it is absolutely set up for success and that we've had a good, broad look at how we might best achieve that. So we know there's quite a lot of interest in, for example, partnership alliances and possibly even bigger changes. We want to explore those opportunities in a systematic way and really make sure this business is set for success. Martyn, do you want to just comment on the...

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [27]

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Yes, sure. Thanks, David. Good morning. So again, Corporate, Food & Services is really 4 key buckets there in terms of the movement. So firstly is SPC. So we did make what we've called a modest loss in the half. So that does go some way to the movement year-on-year. The second one is our property division. So the largest movement in that is if you think about last year, the property division owned the Richlands site, and the Australian Beverages division was paying rent to it. Now that we've sold it, the Australian Beverages is just paying rent to the landlord. So that income is not being recorded in the property division anymore because we sold the asset. And then the others, I would say, are really investments for the future. So you heard Alison say we've made our first investment in the Amatil X program and we've created a small team there. It's not only about investments in start-ups, but it's also around innovation internally and projects that we're doing with our staff and with external parties to come up with innovation to help our core business. So we've invested in that. And then also, we've invested in some good capabilities, so particularly around IT so the creation of a group CIO, group chief data officer and some cybersecurity investments as well and some other group capabilities that we've done. So there's quite a few bits and pieces in there. Unfortunately, they all went in the one direction.

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David Errington, BofA Merrill Lynch, Research Division - Head of Consumer Research for Australia and Asia [28]

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But the whale is SPC. The whale is SPC, is it? The drop is mainly SPC?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [29]

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No, SPC wouldn't be half of the drop, but it is a reasonable part of the difference.

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Operator [30]

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Your next question is from Tom Kierath from Morgan Stanley.

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Thomas Kierath, Morgan Stanley, Research Division - Executive Director [31]

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Just had a couple of questions on the Aussie beverages business. Thanks for giving us the breakdown of the NSR per case. I was just interested in the mix amount there. I think it was negative 0.8. Can you talk through the kind of small pack shift, if that's kind of helping there; and then the channel shift? I just sort of thought those couple of drivers would have actually meant that that number's positive, but it's obviously negative.

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [32]

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Tom, it's Martyn. Yes, it's -- I'd say probably the 2 most material impacts on that are a channel shift to grocery. We called out the grocery and PNC were good growth, but in our immediate consumption channel, it's still pretty challenging. And our rate per case is much higher in immediate consumption than it is in groceries. That would be one element. And then the second element would be a category mix toward water. So as I said, they'd be the 2 most material impacts on that number.

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Thomas Kierath, Morgan Stanley, Research Division - Executive Director [33]

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Yes, right. And then I think you said you've signed a few long-term contracts in the HORECA channel. How do the economics look pre and post those deals? Are you having to invest a bit of money to keep them on? Can you just talk about kind of how things should look? Obviously, not all of it's going to be in the P&L this half just gone and I notice that they're actually -- they're quite long-term deals, most of them.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [34]

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Yes, look, I wouldn't want to comment on any of the specific arrangements, Tom. We're absolutely delighted to have those long-term relationships. And certainly, in the case of Hungry Jacks, that's a relationship that has endured and stood the test of time for decades. So we're very, very proud of these flagship customers, and we work with them really to -- it really is a partnership to bring innovation, not just product innovation, but also equipment innovation and different ways of working with them that help them drive value, that help them drive beverage incidence with their products and, importantly, that help them respond to the changing consumer needs out there including around health and well-being. So there's a lot of moving parts to those relationships, and we're absolutely delighted to continue and have the privilege to serve these outstanding customers.

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Thomas Kierath, Morgan Stanley, Research Division - Executive Director [35]

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Do you expect them to be more profitable going forward or -- like, how should we think about that? It's obviously a big part of your business, and I guess, a great strength of the business over a long time. But be interested to hear your thoughts on if they're going to be more profitable or less profitable going forward?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [36]

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Well, I think, I mean, you should look at these in -- against the backdrop of the overall market and the trends that are out there. Each customer situation, though, is quite different, so I can't really generalize.

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Operator [37]

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Your next question is from Craig Woolford from Citigroup.

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Craig John Woolford, Citigroup Inc, Research Division - MD and Head of Australian Consumer Research Team [38]

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Just wanted to understand the moving parts of that Australia segment. Maybe if I can just start off by confirming some of the figures that you've quoted. So obviously, that was a $20 million investment in the first half, half of the $40 million. And then you said in terms of cost savings, that was $35 million, and you achieved half in the first half, so I assume that was a $17 million cost saving. And then there was a $10 million CDS benefit in the first half for EBIT. If I pull all that together, there's a residual factor of negative $14 million to bridge from 1H '17 to 1H '18 results. So I'm just trying to understand what other negative impact is the company experiencing in its Australian segment on earnings.

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [39]

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I think that those things you all quoted make sense. I think you've got the understanding right on those things. Clearly, the -- we said that we would invest any savings we made in this year, so that's that half of the $35 million, indicatively, we've invested and half of the $40 million that we've brought forward. So yes, we've got savings, but we've also invested those. And you'll have seen the impact of our price investment and the impact of the mix in channel shift is reasonably significant. We invested in marketing in the first half. That was quite significantly up on the previous year, although our overall selling expenses were pretty much flat on the prior year as a result of some of the savings that we made. So I'm not privy to your bridge, unfortunately, but I think that your understanding of those numbers makes sense, but we have invested in the business, particularly in price and marketing.

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Craig John Woolford, Citigroup Inc, Research Division - MD and Head of Australian Consumer Research Team [40]

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Okay. Yes, well maybe we'll take it off-line later, just to understand those factors. Two other questions quickly. So just on Indonesia, the commentary that market share declined in juice, tea and dairy. Just trying to understand that a bit more, it seems a change in trend. What has impacted market share in Indonesia in those categories?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [41]

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Yes, sure. So we gained share in sparkling, which is the most significant part of our business. We did lose a very modest amount of share in tea and a little bit of share in juice, which juice tends to be -- is quite a small category. And then dairy, also really small. So I think the overall position was a slight share decline, but really, reflecting the categories that we do and don't play in. So water is such a dominant category in Indonesia, and we really don't have a presence of significance. Water was the growth category in Indonesia over the last half. So yes, it's -- I don't think there's any -- there's no sort of major concern to flag on those share trends. As I say, they were really at the margin in terms of the overall position and very pleasing that we made another very good, solid gain in our made category, which is sparkling. The opportunity for us -- clear opportunity for us is to grow the category.

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Craig John Woolford, Citigroup Inc, Research Division - MD and Head of Australian Consumer Research Team [42]

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But do you not -- I mean tea's the bigger category than sparkling from an industry perspective. What was the reason for the loss of share there?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [43]

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Look, our share in tea is quite small. From memory, I think it's around about 9% or thereabouts. And it was a fraction of a share point that we lost. There's -- the tea segment is a very competitive one. And there's some very good local competitors in tea. So we didn't -- we've made some changes to our tea offer, and we're still, I would say, sort of refining that to get it right so that it's resonating with the consumer.

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Craig John Woolford, Citigroup Inc, Research Division - MD and Head of Australian Consumer Research Team [44]

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Okay. All right. And just lastly, what's the outlook for COGS inflation for the second half, Martyn? Obviously, PET is up, but sugar's down. What should we expect?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [45]

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Yes. Well, I think, back in November, we said that commodities and COGS would be pretty benign for this year. Clearly, we have significant hedging in place in the sugar and aluminum. The one kind of wildcard, if you like, is PET resin. That has gone up in price quite a lot this year. So that has had a negative impact on COGS, which will be flowing through the second half. I don't really want to give you a number because I don't know what the PET resin price is going to be. So we can't hedge in that category, but suffice to say that it's been a negative impact to us this year. We're already hedged out, let's say, around 60% for next year in sugar and ali, but again, we'll be exposed to PET resin next year so...

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Operator [46]

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Your next question is from Larry Gandler from Crédit Suisse.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [47]

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Can I ask a question about Indonesia to start? So Alison, I understand the economy is not growing as fast as, perhaps, enough to ignite some of the younger consumers. But there is quite a bit of fiscal stimulus up there. You've got a situation of declining volume, declining revenue and 10% margins. I remember when you first took the job, you indicated that EBIT margins in Indonesia wouldn't get back to double-digit until 2023. We're way ahead of that. Do you feel that, perhaps, these margins are unsustainable and you're not getting the volume and revenue growth because either prices are too high or there's opportunity to deal some back and stimulate volume?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [48]

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No. Look, that's the segment margin I think that you're referring to, the 10%, Larry. So the Indonesian margin is closer to around about 6%. So that sort of EBIT margin, I think we are not concerned about that. Clearly, our priority is to grow the business through revenue and volume. We really want to make sure that we are driving the top line growth rather than driving profitability through margin.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [49]

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Okay. So yes, I guess that's fair to say that it's a blended margin. So I guess, there's no real sort of pressure to push prices down you're seeing in that marketplace?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [50]

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Well, it's a very price-competitive market. There's no doubt about that. And there are many, many transactions occurring at lower price points than our range sits at. So we're always challenging ourselves, and we've -- we're very excited now to have our 250-ml affordable sparkling product in the market. So that is at a much more affordable price point now for the Indonesian consumer, and we're seeing some really good growth out of that. It's also got a much longer shelf life than we previously had. So I think if we look over a period of time, we have rebased our prices considerably, and we've also added many more affordable pack formats such as cups as well, which have a much lower price point. So we've made some really good progress on that. We're doing a lot of work, as I mentioned, with the Coca-Cola Company, including making sure we've got a really current understanding of the consumer. And it is very clear that it's not all about price for the Indonesian consumer. We do need to be affordable. However, it's very much about having the right sort of benefits and being at a reasonable price for those benefits. It's not only about being cheap.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [51]

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Okay, good. And in Papua New Guinea and I'd like to also touch on Indonesia one more time, but just on Papua New Guinea. Some of the logistics issues and manufacturing challenges, have they been rectified? And what implications do we have for the second half with regards to those issues?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [52]

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Yes. It's a little bit frustrating for the team up there to have had the issues that we've had. A lot of it has really related to the installation of a new can line up there, which we've had some challenges commissioning. And we have a very -- a good level of support in there from our Indonesian supply chain team, and I'm very confident that we'll work through those pretty much imminently. So it shouldn't cause us too much disruption for the second half.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [53]

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And the logistics issue, is that the same thing?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [54]

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Logistics issues have more related to some of the disruption that we can experience around the infrastructure, the roads, weather. And the Highlands, the accessibility of the Highlands can be quite problematic at times. It's a challenging team for -- challenging country for our team up there to operate in. And those logistic disruptions are really, yes, very much temporary.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [55]

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So they've been rectified, right yes?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [56]

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Yes, yes.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [57]

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Okay, good. And I guess, with the 2H, 1H, Indonesia, Papua New Guinea, just dwelling on that. Martyn, maybe Ramadan kind of moved slightly more, almost now completely, into the first half. Can you give us a feel for maybe how that influences our second half?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [58]

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Well, in and of itself, yes, that would mean that the first half would be bigger than the second half. Having said that, there's been quite a difference in retailer inventories at the end of Ramadan. So that will prove to our benefit in the second half, and then hopefully, we can get PNG firing in so that will have an improvement in the second half as well. But still, a lot to play for in that segment for the rest of the year.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [59]

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Okay. So maybe because of retailer inventories, you're suggesting that the impact of Ramadan's seasonality won't be as great as perhaps before?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [60]

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I'm just saying that retailer inventories were a fair bit lower than last year.

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Operator [61]

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Your next question is from Richard Barwick from CLSA.

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Richard Barwick, CLSA Limited, Research Division - Research Analyst [62]

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Just want to get a little bit more detail on this, the $10 million reinvestment in New South Wales in the second half, actually, what it looks like in practice. And do you anticipate a situation where essentially, all suppliers will be looking to do the same, if, obviously, they were to be reinvesting their share of the excess? And I guess, part and parcel of that, yes, I can understand that you -- that might drive a volume benefit arguably. But do you think there's a risk that your supermarket customers, in particular, would be reluctant to move away from this sort of supersized discounting once it finishes?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [63]

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Richard, yes. The -- first of all, how we would have applied that money, it's very much a bespoke thing by customer. As you can imagine, different customers, whether they're, for example, a supermarket or more of our traditional route customers, very different kind of opportunities to promote or apply those funds in other ways that it does flow back to consumers. So it is very much a conversation that's going on with all of our customers in different ways according to the channel. I can't comment on competitors. We've certainly, as a listed company, I think, been very clear and transparent about our approach to handling this impost and how we've thought about the way we passed it through to our customers. And then including the rationale for the original impost which, including GST, was $0.15 and is now -- we've revised to $0.12 including GST. And we've also certainly been very clear and consistent that we do not want to and will not profit from this government impost. It is something that we've been very transparent as to how we've passed through I think. So can't comment on competitors on that front. And sorry, you had a third question, which...

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Richard Barwick, CLSA Limited, Research Division - Research Analyst [64]

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Just saying that once this has been passed through, I mean, is there a risk that the customers then go, "Okay, we actually quite like this -- these lower prices" and are going to be reluctant to let prices move back up or the discounting to cease?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [65]

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I don't think so. I think everyone understands that we're just going through -- like I said before, it's a bit of a bumpy period while we sort of normalize so that the amount that Exchange for Change is charging us, and we, in turn, are charging through to customers, and customers are in turn passing through to consumers. Once that normalizes and is in line with the actual redemptions experience, so I think, at the moment, Exchange for Change are estimating that around about 2/3 of containers are being redeemed, either through the network operator or through the MRFs. Once that all sort of settles down, and we expect that, based on our experience operating other schemes, for example, in South Australia, that we will move gradually to a higher redemption rate than we're currently at. So that will all settle down. I think this is sort of to be expected at this early stage of the introduction of this scheme.

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Richard Barwick, CLSA Limited, Research Division - Research Analyst [66]

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Okay. And just New Zealand. I mean, that's quite extraordinary volume growth to be at 7.9%. I know you've had some -- I think, back in '16, you had good growth, but that was on the back of, I think, some contract wins. Is there any contract wins to call out across NZ? And I guess even if -- well if the answer to -- is no, I'd be fascinated to hear you -- your explanation as to what's really -- what's different here between Australia and New Zealand when you're looking at the contracting volume outcomes?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [67]

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Yes. Well, it's fantastic performance from New Zealand, and it's a story that has played out now over 4 years. So it's certainly not a flash in the pan. Our New Zealand team have delivered exceptional growth in a very consistent manner over 4 years now. And there are no particular one-offs to call out about it. I think, undoubtedly, we take a lot of encouragement from it. Australia and New Zealand, there are some differences in, for example, our portfolio and possibly in the broader environment. However, we have much more in common than is different. So been delighted to see that Peter West, our new Aus Bev Managing Director, has been very quick to get over there and spend time with Chris Litchfield and the 2 senior teams are really making sure that we learn from each other. You might have seen that we've got Steve Paddis, who's our new CFO for Aus Bev, who was the CFO for New Zealand for 4 years, for that sort of 4-year period. He's now in Aus Bev. So we're really working very hard to make sure that we are transferring all the learnings from the outstanding job that our New Zealand team are doing. And look, I'd say it really is about great execution of the basics for our customers and really making sure that we're serving all of our customers, from the very largest to the very smallest, extremely well with a high level of face-to-face service and outstanding delivery and fulfillment. It's also really great clarity around driving our core portfolio, and we're just delighted to see the results that they're achieving right across our rage, but absolutely starting with our strength, which is brand Coca-Cola and sparkling.

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Richard Barwick, CLSA Limited, Research Division - Research Analyst [68]

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All right. And just the last one for me, one for you, Martyn. What level of the remaining -- the committed funds to the Indo CapEx associated with the KO transaction?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [69]

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So just so I understand, are you asking how much of the money we received for the share investment is left?

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Richard Barwick, CLSA Limited, Research Division - Research Analyst [70]

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Yes, that's right. So that's -- I mean, you -- there's the $500 million that was to be devoted to Indo in CapEx.

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [71]

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Yes, we haven't disclosed the number. Fair to say the answer is probably plenty. So that business is reasonably cash neutral already because the profitability of the business due to the great productivity improvements they've done is actually quite a bit of ahead of where the business case was at, combined with the fact that volumes being a lot lower, we haven't had to invest in the big new plants and facilities that were originally in the business plan. So when we originally did that transaction, I think we probably called out the money would probably last for 3 to 4 years. Suffice to say that, that period is going to be significantly longer. So we've got a fair amount of money on deposit up in Indonesia that's ring-fenced for those investments going forward and will last us into the foreseeable future.

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Richard Barwick, CLSA Limited, Research Division - Research Analyst [72]

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Well, I mean, that's where that question comes from. If we're trying to identify really what your true net debt is in a way, then that's an important number for us to take into consideration.

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [73]

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Yes. And I appreciate where you're coming from, but we haven't disclosed that information. We'd rather keep that to ourselves.

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Operator [74]

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Your next question is from Ben Gilbert from UBS Investment Bank.

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Ben Gilbert, UBS Investment Bank, Research Division - Executive Director and Analyst [75]

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Alison and Martyn, just a couple of quick ones to start with. Just on the cash conversion, how you're thinking about that for the full year in terms of how much of this working capital piece is going to unwind for calendar '18. And maybe any color about how you're thinking about sort of where you target cash conversions for medium term?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [76]

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Yes. Morning, Ben. We haven't set a target, as you can understand. You never foresee what may happen in working capital, and we may sometimes use working capital to drive some of our business. We've done that before in alcohol and coffee, for example, where we've done contracts where we've taken on inventory that's reasonably high value, et cetera. Suffice to say, we were pretty disappointed with the cash realization number for the first half, notwithstanding the fact that there were some proactive things in there like the extension of credit in Indonesia. As I said, those credit levels are back to normal now in Indonesia. Inventory in SPC is a challenge. As you'd appreciate, the nature of that business, you take in all the fruit for the season, and then you have to sell it. So it'll depend on the sales that we make during the second half in terms of where that lands. But we do have a number of activities in place on working capital, and our target for sure is to end the year with a much better cash realization number than the one we've reported for the first half.

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Ben Gilbert, UBS Investment Bank, Research Division - Executive Director and Analyst [77]

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Okay. And just on Indo, I think, obviously, you've sort of given some color that we could sort of back out the Indo margins probably somewhere in the -- around sort a bit above 6% versus the aspirational 10%. I know you said you'd done a great job around efficiencies, et cetera. How are you thinking about that sort of 3-year target now for that 10% if macro was to remain relatively benign? Is it still an achievable target?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [78]

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I think we're still very much committed to the directional targets that we have for the business. Clearly, since we set those targets back in 2014, late 2014, with our partner, the Coca-Cola Company, the absolute market growth has slowed quite a bit versus what we were working towards. So I would say that directionally, though, that's the right -- that remains the right sort of aspiration. In the near term, our absolute priority is growing the business via the top line though rather than growing profit margin.

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Ben Gilbert, UBS Investment Bank, Research Division - Executive Director and Analyst [79]

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Great. And just final quick one for me. Obviously, it's a great result, I think, in Australia in terms of some of the trends with Coke volume turning positive, et cetera. Could you just give us some context in terms of how you're seeing the markets? So when you look at sort of industry scan data, et cetera? Because I think my understanding was scan data's probably turned positive on an MAT basis over the last sort of quarter or so. I suppose the question is how you're seeing your share in channel? Are you starting to take share at an accelerating rate? Or is it pretty static? And then on Australia, which is slightly probably a little bit more positive about the outlook now versus where you were 6 months ago as we've sort of got through the CDS and probably hasn't been as bad as it could have potentially been?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [80]

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Let me have a go, and then Martyn might want to add. I mean look, I'd say it's early days for us. We are encouraged. We are, overall, in a beverages market that is a growing market in Australia. So that's good. It is a very competitive market. I think what we're pleased with is the clarity that we've got over our plan, the commitment that we've got from The Coca-Cola Company to invest alongside us to make it happen, the confidence that we've got in our leadership team and the experience, obviously, that Peter West and Steve Paddis bring. And so we still are very conscious we've got a lot to do and really want to make sure that we're quite sort of focused and really make sure that our core, which is cola and water, is strong. And we continue to build our position, particularly in these double-down growth areas where we're investing quite heavily. But yes, look, plenty more to do.

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Ben Gilbert, UBS Investment Bank, Research Division - Executive Director and Analyst [81]

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So the share gains, did they accelerate over the half when you look on sort of your scan and these sorts of data sets within the CSD category?

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Martyn J. Roberts, Coca-Cola Amatil Limited - Group CFO [82]

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Ben, it's Martyn. So I'd say, overall, for the half in terms of share, and obviously, just bear in mind that our measured market is less than half of our business. So it's only really grocery. So just with that in mind, we -- as we called out, we grew share in diets and lights cola. In terms of classic cola, we pretty much are the market, but we held our very high share. Within that, we did have some challenges in flavors and some of that was some own goals earlier in the year particularly around Kirks and some production issues we had there. That probably improved slightly towards the second half. But other than that, it was -- particularly in cola, it was reasonably consistent through the half. So that would be how I would summarize sparkling share for the period.

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Operator [83]

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Your next question is from Andrew McLennan from Goldman Sachs.

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Andrew J. McLennan, Goldman Sachs Group Inc., Research Division - Consumer and Retail Analyst [84]

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Just a follow-up there, if I can. Lots of innovation coming through, which is a great thing to see. But I was just wondering around the Coke growth. Did you see the growth across the board? Or is it particularly due to the innovation? And the reason why I ask is, obviously, with the CDS coming into New South Wales, there's a change in the relativity between the price of water and the price of carbonated soft drink. I'm just wondering whether you were able to sort of work out what's been driving the improved performance.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [85]

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I'd say that we certainly have benefited from Coke No Sugar and the commitment that we've made to ensuring that that proposition, and we've, I think, previously advised that we're in the process now of -- and fairly well-advanced stages of phasing out Coke Zero, which has been something we've handled, obviously, with a great deal of care. But really encouraged to see how we're doing with Coke No Sugar. I have to say the performance of Coke Classic has also been really encouraging as well, and that reflects the focus that we've got in working with our customers and also the initiatives sitting in our accelerated growth plan where, I think, we're just working a lot better in our, what we call, sort of through the lines, so connecting our above-the-line media activities through to making sure that we've got great point of purchase marketing and activation that really captures consumers when they're just about to make a decision as well. So it does feel like a pretty encouraging story for brand Coca-Cola, and that's absolutely very, very good news for us.

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Andrew J. McLennan, Goldman Sachs Group Inc., Research Division - Consumer and Retail Analyst [86]

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And just if you could extend that into the Beverages for Life strategy of KO. Obviously, the bottlers are starting to talk about this a bit more. Is the innovation that we're seeing at the moment due to prior planning? Or are we starting to see Beverages for Life strategy filtering through to Amatil?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [87]

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Well, the accelerated growth plan that we put together last year with our partners, The Coca-Cola Company, was very much all about bringing beverages to life (sic) [Beverages for Life] to life if you like, in our market here in Australia in a way that we think is relevant for Australia. We absolutely seek to build from our strengths, our core and brand Coca-Cola at the heart of that, along with our strength in water but to leverage the incredible experience and brands that The Coca-Cola Company has right around the world, in other categories as well. And obviously, dairy is a huge priority for us. We -- in water, we're delighted with the progress we're making with Mount Franklin Lightly Sparkling, for example, which we've now got Mount Franklin Lightly Sparkling in cans. That's been doing very well. So there's a lot to be really pleased with. There's still, we know, a lot to do. And I think for us, we really want to make sure that we are very focused. We have brought a tremendous amount of innovation to market. I think our partners have absolutely stepped up to the plate on innovation and starting with brand Coca-Cola with, as I mentioned, Coke No Sugar, but also, of course, all the flavors, many of which are leveraging Coke No Sugar; in New Zealand, 100% stevia, a world first; the relaunch of Cascade, which is very exciting in the adult sparkling space is a big one for us. Tremendous amount of innovation going off in water, dairy with Barista Bros. With juice, with tea, pretty much every category, I think we've really, really accelerated the innovation, which is very exciting. We need to make sure that we bed that down and really make sure that -- yes, that we're building from a solid base. So that's our focus, and that's what the accelerated growth plan is all about.

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Andrew J. McLennan, Goldman Sachs Group Inc., Research Division - Consumer and Retail Analyst [88]

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That's good. Can I ask one more just on SPC since we're talking innovation? I think the review is a great idea. From my perspective, I just think SPC with its 100-year heritage and its capital it's sourcing, it could be in a fantastic position if there was a much greater innovation, particularly around the products that are seeing a lot of growth in the Chinese market at the moment. From my perspective, it seems like a bit of a no-brainer, but it's just about execution, really. But why do you need to partner with someone? What's the thinking behind that?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [89]

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Well, we may not, and it's going to be, I think, really interesting to see what comes out. We are really confident about the future of SPC for all the reasons you mentioned, and really pleased with the growth options that we have in play, including, as you mentioned, China, I think, absolutely is tremendous. And we've got a great partnership up there and we're really seeing some good, early progress. For us, it's about how can we accelerate that and really recognizing that it is for this business about driving the top line and driving it into some of these new areas faster if we possibly can. And we do see that based on sort of discussions and interest that we've had, we see there's actually quite a number of interesting possibilities that really will secure the future of SPC, and we're keen to explore those.

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Operator [90]

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Your next question is from Adam Fleck from Morningstar.

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Adam Fleck, Morningstar Inc., Research Division - Director of Consumer Equity Research & Regional Director [91]

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Alison, I really appreciate the comments on innovation. Seems like you're doing a lot there. But The Coca-Cola Company has noted recently that it's been aggressive in helping other bottlers drive out underperforming SKUs as well. How much has that been a focus area for you?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [92]

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It is definitely a focus area for us. It's certainly one of the opportunities but also the challenges of how beverages -- the beverage landscape is evolving is that there is a lot more fragmentation, a lot more sort of niches. And definitely, it's important to make some choices about where you play and where you don't and to make sure that we're able to serve our customers to a high -- a very high level with a portfolio that makes sense for them but then without ending up with complexity, a level of complexity that can create a lot of cost. So we're very focused on making sure that we do have a good discipline in our business; that we're introducing new products that are accretive rather than just sort of spreading the same demand over a greater number of products; and also, that we're imposing a discipline around removing SKUs that, perhaps, have served their purpose and no longer have a role to play. And that's something that Peter West, our new Aus Bev MD, has a huge amount of experience in doing from his FMCG experience. So I know that that's a top priority for him.

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Adam Fleck, Morningstar Inc., Research Division - Director of Consumer Equity Research & Regional Director [93]

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Great. And then just going back to the New South Wales CDS. You noted in your release that you saw month-to-month volatility. But did you see a generally positive trajectory as consumers became more accustomed to the deposit? Or was it really all over the place?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [94]

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It's -- really, it still is all over the place. I know that might sound surprising, but it is really only 7 months. And there's been quite a lot of -- there's a lot of -- there was Christmas. There's been weather. There's been promotions. And there's also been differentials in the way that our customers have chosen to flow it on. So for example, private label water, some customers didn't flow through the whole impact. So there is still quite a lot of noise. I think, overall, the impact that Martyn described has perhaps been to date, on average, less than we might have expected. But it's hard and impossible indeed to isolate a pure CDS impact. And we're just really watching it very closely and obviously, also preparing for the implementation in Queensland a little later this year.

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Operator [95]

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Your next question is from Morana Hunter from Macquarie.

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Morana Hunter, Macquarie Research - Research Analyst [96]

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Just a very quick question around your ambitions to reduce the sugar content by 20% by 2025. A number of the other bottlers have called out reduced sugar content as a positive for their margins where they're replacing, I guess, up to 30% of the content with the cheapest sweetener. Now I realize it's still early days, but how should we think about this in Australia? I guess, does it present an opportunity for margin uplift? And then where you are reformulating, how do you balance this with overall consumer demand? And I ask this only because we have seen some sugar reductions negatively impact volumes in some of the European countries.

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [97]

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Yes, Morana, I wouldn't make any assumptions about it improving margin. We are looking to take a number of initiatives to encourage the uptake of Coke No Sugar and so really making sure that the value is there for consumers is a very important part of that. We really also are looking to reshape our overall portfolio towards smaller pack sizes as well. So there's a whole lot of mix implications going on around our strategy to achieve our 20% reduction target by 2020. And yes, for us, this is certainly not about improving margins. It's really about making sure that our portfolio reflects what consumers want and is absolutely leading the way on behalf of our industry in terms of consumer well-being.

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Morana Hunter, Macquarie Research - Research Analyst [98]

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Sure no, that's clear. And sorry, and then where you are reducing sugar as opposed to repackaging, how do you balance this with consumer reaction? Is there a particular plan in place or a case study that you're referring to, I guess, from some of the offshore countries?

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Alison Mary Watkins, Coca-Cola Amatil Limited - Group MD & Executive Director [99]

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Well, we're learning a lot from offshore, and that's certainly one of the benefits of being part of the Coca-Cola system. There's a lot of great experience. We're also working really closely with our customers here in Australia. And for example, some of our quick-service restaurant customers are really wanting to be able to offer their consumers no-sugar alternatives and to make that a lot more prominent as part of their marketing, for example. So we're really working with customers there to really make sure that consumers are thinking about the choice much more actively. I'm also really excited about the work we're doing in indigenous communities to reshape the portfolio, the way we're positioning our portfolio and marketing our portfolio and really encouraging results about how we can influence choice and influence consumers in a very positive way to reduce their sugar intake.

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Operator [100]

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There are no further questions at this time.

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David Akers, Coca-Cola Amatil Limited - Group Head of IR [101]

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Thanks again, everyone, for joining the call and webcast. We look forward to seeing you over the next few weeks.