Coca-Cola HBC reports strong first half, acquires Egypt bottler

Drinks bottling company Coca-Cola HBC reported “strong momentum” across all of its segments in its first half update on Thursday, with first half currency-neutral revenue growth of 23.1% on a like-for-like basis, and reported revenues ahead 14.7% to €3.25bn (£2.75bn).

The FTSE 100 firm also announced that its subsidiary, CCH Holdings, has agreed to acquire 94.7% of the Coca-Cola Bottling Company of Egypt (CCBCE) from its major shareholders, for a total of $427m (£307.89m).

Those shareholders are a wholly-owned affiliate of the Coca-Cola Company, and MAC Beverages, as well as some “affiliated entities”.

Looking at its first-half performance, Coca-Cola HBC said currency-neutral net sales revenues closed 4% above 2019 levels on a like-for-like basis, while value share gains increased by 50bps in non-alcoholic ready-to-drink (NARTD).

Volume growth was 15.9% like-for-like, with “sustained performance” reported in the at-home channel complemented by recovery in out-of-home during the second quarter, as many Covid-19 restrictions were eased in a number of territories.

Operating profit surged 72.5% to €350.1m for the six months ended 2 July, while comparable EBIT was 67.8% firmer at €350.3m.

Net profit came in 88% higher year-on-year at €233.1m, with basic earnings per share rising 87.4% to 63.9 euro cents, and comparable earnings being 64.6 cents per share, making for growth of 82%.

Coca-Cola HBC reported improvements in currency-neutral revenue per case, benefiting from pricing action in more than 90% of its markets, and positive movements in category, package and channel mix.

The roll-out of the Costa Coffee brand was reported to be progressing “well”, with the company’s coffee strategy strengthened with the premium Italian brand, Caffè Vergnano, to start distribution by 2022.

Operating leverage and cost savings resulted in the comparable EBIT margin rising 340 basis points to 10.8%.

A total of €120m of Covid-related operational expenditure savings were achieved in 2020, with the board saying it was expecting to retain around €20m of that in 2021, and thus €100m of those costs to return in the second half.

“I believe these results demonstrate the power of our 24/7 portfolio, our revenue growth management actions, the strength of our execution capabilities and the talent of our people whose resilience and adaptability will underpin our future opportunities,” said chief executive officer Zoran Bogdanovic.

“The business gained momentum as the out-of-home channel recovered and growth in at-home continued.

“In addition, we have delivered growth in the established and developing segments alongside the consistent strong performance in the emerging segment.”

Bogdanovic said the company was seeing “excellent performance” from its areas of strategic focus - in particular low and no-sugar sparkling, adult sparkling and energy.

“We have strengthened our coffee strategy with Caffè Vergnano, which will add a premium offering alongside the broad appeal of Costa Coffee.

“We have made progress on our ‘World Without Waste’ agenda, with new launches of 100%-recycled PET packaged beverages.

“We are encouraged by the strength of the performance, and while conscious of the risks as the Covid-19 pandemic continues to impact our markets, we continue to expect a strong recovery in FX-neutral revenues and now believe that we can achieve a 20 to 30 basis point EBIT margin expansion this year.”

On the Egypt acquisition, Coca-Cola HC said the move would give it access to the second largest NARTD market in Africa by volume, building on its existing scale, adding that Nigeria and Egypt accounted for around 25% of the continent's population.

It described it as a “significant” opportunity to leverage its route-to-market capabilities and experience operating in emerging markets, to increase penetration of the Coca-Cola Company's brand portfolio and drive category leadership.

The transaction would expand Coca-Cola HBC's exposure to high-growth geographies, the board added, explaining that low-single digit earnings per share accretion was expected in the near-term.

It said there would be an opportunity to create further value through progressively moving the acquisition’s margins towards the Coca-Cola HBC group average over time.

“We see great potential for this business to unlock considerable opportunities in the NARTD category in Egypt,” Zoran Bogdanovic said.

“With our best-in-class execution capabilities, commercial expertise and world leading approach to sustainability and communities, we believe there is a significant opportunity to create value for all stakeholders.

“We appreciate the trust placed in us by the Coca-Cola Company and MBL, and look forward to becoming part of the Coca-Cola system in Egypt.”

At 0916 BST, shares in Coca-Cola HBC were up 0.7% at 2,737p.