Coca-Cola HBC revenues slip as Covid lockdowns take effect

Coca-Cola HBC updated the market on its first quarter of trading on Thursday, reporting that it saw “strong” trading in January and February, but weaker results in March as government lockdowns “severely impacted” the out-of-home channel.

The FTSE 100 bottler of Coca-Cola Company products said all of its employees were safe, with customers that were open for business supplied, and its production and logistics operations continuing.

First quarter currency-neutral revenue declined by 1.2%, or by 0.5% when adjusted for trading days and the Bambi acquisition, which completed in June 2019.

Volumes in the quarter increased by 3.1%, as the board said “good growth” year-to-date in February was partly offset by a decline in March, while fewer selling days was estimated to have cost 2.1 percentage points of growth in the period, excluding Bambi.

Currency-neutral revenue per case declined 4.1%, which was driven by a negative country mix from strong growth in Nigeria following prior-year pricing actions, the discontinuation of Lavazza Coffee, and a shift in channel and pack mix caused by “significantly reduced” volumes in the out-of-home channel, growth in discounters and supermarkets, and a shift into large format packs in March.

Coca-Cola HBC said it gained or maintained its share in the majority of its markets, adding that currency-neutral revenue growth by segment was “heavily influenced” by the timing and severity of lockdowns in its various markets.

In established markets, revenue was down 7.2% and volume fell 5.5%, as countries in that segment entered lockdown first and derived a larger proportion of revenues from the out-of-home channel.

Developing markets saw revenue fall 2.9% while volume grew 1.8%, offset by negative pack mix due to lockdown measures and “strong” growth from organised trade.

Revenue in emerging markets, meanwhile, improved by 4.8% with volume growing 8.1%, as the board reported continued growth in most markets there, and double-digit volume growth in Nigeria, which entered lockdown after the quarter ended.

In April, with every market in lockdown, currency-neutral revenue fell 37.2% and volumes were 27.3% weaker, excluding Bambi.

The board said the expected combined net impact of foreign exchange and raw materials for 2020 was unchanged, with benefits from lower commodity costs offsetting weaker foreign exchange impacts.

“Decisive actions” had been taken to reduce costs and re-prioritise investments, with 2020 discretionary expenditure cut by more than €100m compared to its plan, and cash capital expenditure cut by more than €100m, or just under 20% compared to its plan.

Coca-Cola HBC said it had a “strong” balance sheet and sufficient liquidity to meet all of its financial commitments, as well as to operate and invest in the business.

“The challenges presented by the Covid-19 pandemic are unprecedented for our business and the communities where we operate,” said chief executive officer Zoran Bogdanovic.

“On behalf of all of us at Coca-Cola HBC, I would like to sincerely thank those working tirelessly to keep us all safe.

“After a strong start to 2020, March and especially April have been more difficult.”

Bogdanovic said the strong performance in January and February ensured that the company entered the crisis from a position of real strength, with “sound” business fundamentals and a “solid” balance sheet.

“When the pandemic struck we took decisive actions, fully focused on keeping our people safe, our customers served and our communities supported.

“We are also effectively managing the business for the conditions which will support our performance and ensure we are well-placed to move into the recovery phase when it comes.”

At 0947 BST, shares in Coca-Cola HBC were down 0.31% at 1,922p.