Coca-Cola Amatil to close South Australia plant, cut 180 jobs

Patrick Hatch

Published: February 22, 2017 - 10:43AM

Coca-Cola Amatil will close its manufacturing plant in South Australia, cuttingabout 180 jobs, and shift the work to Queensland as part of a $90 million supply chain restructure.

As part of its profit announcement on Wednesday, the beverage giant said it had reviewed its operations across Australia and concluded it should increase production in Queensland and Western Australia and close its plant in the Adelaide suburb of Thebarton.

"The review found that further development of our facility at Thebarton in South Australia was constrained by its CBD location, site layout, dated infrastructureand expensive logistics," CCA'smanaging director Alison Watkins said in a statement.

"This isn't a decision we have taken lightly, but we know it will be important for ensuring our position in the market into the future."

The company unveiled underlying pre-tax profit of $417.9 million for the half year up6.2 per cent. Investors welcomed the news sending CCA's share price up almost 7 per cent to $10.60 in early trade.

The Adelaide factory produces glass bottles, fruit juice, dairy products and some alcoholic beverages and Ms Watkins said CCA would provide financial counsellingand help findnew jobs forworkers affected by the 180 lost jobs. Existing administrative, distribution, and recycling work would remain in South Australia, she said.

CCA will spend $90 million building a new glass production line and juice and dairy production capacity at its plant in Richlands, on Brisbane's outskirts, in addition to the $75 million investment announced last year, the company said.

The Richlands plant will have lower operating costs, in part due to greater automation. Some manufacturing from Adelaide will shift to Kewdale in WA, Moorabbin in Victoria and Northmead in NSW, CCA said.

Shutting the Adelaide plant will save CCA $20 million a year from 2020, which would be reinvested in the business, CCA said.CCA made the strategic announcement as itreported a $257 million full-year net profit on Wednesday morning, down from $403 million last financial year.

The company recorded a $171.8 million non-cash impairment charge against its troubled SPC tinned fruit and vegetablebusiness.

This story was found at: http://www.smh.com.au/business/cocacola-amatil-to-close-south-australia-plant-cut-180-jobs-20170222-guia3a.html

a)Draw a clearly-labelled diagram illustrating what the AVC, ATC and MC curves are likely to look like for an old manufacturing plant located in a high-rent location. Explain why you drew it the way you did.

b)On a separate, clearly-labelled diagram, illustrate what the AVC, ATC and MC curves are likely to look like for a newer, more automated plant located in a low-rent location.Explain how it is different from the previous diagram.

c)Use your answers in a) and b) to help and with reference to the article, explain why Coca-Cola Amatil is closing its plant in Thebarton and expanding operations elsewhere.

d)With reference to the article, explain why a company would keep a manufacturing plant open in a high-rent location in the short-term.