Coca-Cola European Partners makes offer for Amatil, declares dividend

Coca-Cola European Partners reported a 4% fall in its comparable volume in its third quarter on Monday, which it said was driven by the continued impact of Covid-19 across its markets.

At the same time, it announced its proposal to acquire the Asia-Pacific based bottler Coca-Cola Amatil, in a deal worth €5.2bn.

It had made a non-binding offer to Coca Cola Amatil’s independent shareholders of AUD 12.75 per share, and would acquire the Coca-Cola Company’s 30.8% interest in Amatil at AUD 9.57 per share in cash, as well as a consideration to be paid in CCEP shares.

The London-listed firm said it had seen an Improvement in away-from-home volumes, falling -17.5% compared to the 50% reduction in the second quarter, reflecting the easing of lockdown measures, but with some outlets still closed or operating at reduced capacity.

Home channel volumes were ahead 6%, swinging from a 3.5% fall in the second quarter, driven by the outperformance of ‘future consumption’ packs, being large PET and can multipacks, and the resolution of a recent customer negotiation, partially offset by weaker immediate consumption trends.

Improvements were seen in total volumes in August and September, due to the reopening of away-from-home outlets and the improvement in the home channel, as well as favourable weather, with volumes falling 10% in July, before rising 1% in August and retreating 2% in September.

Revenue per unit case was ahead 1.0%, which the company put down to an improvement in away-from-home volumes, fewer promotions in the home channel, as well as a favourable brand mix.

CCEP said it was still unable to provide financial guidance for 2020 given the uncertainty being caused by Covid-19, but said it remained on track to deliver previously-announced measures to protect its business.

Looking at operational expenditure, the firm said it was reducing discretionary spend in areas such as trade marketing, promotions, merchandising, incentives and travel, amounting to a potential 2020 reduction of between €200m and €250m.

Total capital expenditure, meanwhile, was set to come in at around €350m for the year.

The company also declared a 2020 dividend of 85 euro cents, representing a payout ratio of around 50% based on current consensus expectations for comparable diluted earnings per share.

“Today, we are very excited to announce a non-binding proposal to acquire Coca-Cola Amatil, one of the largest bottlers and distributors of ready to drink beverages and coffee in the Asia Pacific region,” said chief executive officer Damian Gammell.

“This is a unique and tremendous opportunity to combine two of the world's best bottlers, creating a broader and more balanced geographic footprint, including one of the most attractive and populous emerging markets, doubling our consumer reach to 600 million.

“This larger platform would enable us to scale up even faster than before and solidify our position as the largest Coca-Cola bottler by revenue, further strengthening our strategic partnership with the Coca-Cola Company.”

Gammell said that, combined with its dividend announcement, reflected the board’s confidence in the future and its goal of driving increased shareholder value.

"We continue to demonstrate the resilience of our business and our ability to operate with agility in such a rapidly changing environment.

“Our performance over the summer months was encouraging.

“Volumes significantly improved compared to the second-quarter of the year, mirroring outlet re-openings in the away from home channel, solid demand in the home channel, where we continued to take share, as well as favourable weather across most markets.”

He said that, while the reintroduction of restrictions and local lockdowns had resulted in continued uncertainty about the duration and impact of the pandemic, the company believed that the second quarter would be the most impacted.

“In the meantime, the meaningful actions that we talked to earlier in the year continue to protect our performance and we remain confident that we will emerge from this crisis as a stronger business.

“We continue to adapt to changes in consumer behaviour by focusing on the core brands that our consumers love, leveraging and advancing our digital capabilities, and concentrating even more on the home channel, particularly in the run up to the key Christmas trading period.”

At 0859 GMT, shares in Coca-Cola European Partners were up 5.82% in London, at €34.39.