THE new managing director of Coca-Cola Amatil's food processing unit has wasted little time trying to reverse the decline in the packaged fruit sector.
Less than a month after taking the helm of SPC Ardmona from Vince Pinneri, Coca-Cola veteran Peter Kelly has moved to slash the processor's fruit intake and production following a slump in demand, mainly from export customers.
Mr Kelly has also stepped up pressure on the Gillard Government to lift support for the struggling fruit and vegetable processing industry, which has been hit by a deluge of cheap imported product from Thailand, South Africa and Italy.
Two weeks after halving its intake tonnages for the 2013-2014 summer harvesting season and giving notice to dozens of peach and pear growers in the Goulburn Valley, Mr Kelly has appealed to the government to impose special taxes on imported tinned fruit and tomatoes under the World Trade Organisation Safeguards Agreement.
The Emergency Safeguard actions, which are permitted under WTO rules, would impose emergency taxes on cheap imported foods where domestic industries are suffering damage, The Australian Financial Review reports.
"This is the company's first step in its long-term strategy to fight for support of the local processed fruit industry and its growers," an SPC spokeswoman said. The Australian vegetable industry association, Ausveg, has endorsed SPC Ardmona's move.
"In this current economic climate other countries are able to use Australia as a dumping ground for product and wipe out local competition, allowing them to monopolise supply,' said Ausveg public affairs manager William Churchill.
"If the local competition is exterminated we'll have no other choice but to import all of our food."
Analysts say the earnings outlook for SPC Ardmona this year remains grim, despite major restructuring over the last few years.
Coca-Cola Amatil booked $146 million in goodwill write downs and restructuring charges at SPC Ardmona in February. This followed writedowns and provisions of $80.5 million in 2011, when SPC closed its Mooroopna processing plant and shifted production to Shepparton and Kyabram after a strategic review.
Broker UBS says the latest goodwill writedowns imply that SPC's earnings are unlikely to return to previous levels.
Analysts have little visibility into SPC's profits, as the business is housed within CCA's food, alcohol and services division.
SPC's earnings before interest and tax are believed to have halved over the last fe w years, raising questions about CCA's long term future in the fruit and vegetable processing industry.
SPC says the market share of imported private label canned fruit has grown to 58 per cent, while SPC Ardmona's canned fruit share has fallen to 33 per cent.
The company's export market volumes have declined by 90 per cent in the past five years due to the strength of the Australian dollar and weaker consumer demand overseas.
"The company's forecasts for the coming seasons indicate that there will be even less demand for canning fruit. This has led to a forecast reduction of up to 50 per cent intake tonnages for some fruit categories for the 2014 season," the spokeswoman said.