Coca-Cola HBC achieves another year of currency-neutral growth

Coca-Cola HBC issued its financial results for the full year ended 31 December on Thursday, claiming its second year of foreign exchange-neutral revenue growth above its 4%-to-5% target range, with continued good progress towards its 2020 margin targets.

The FTSE 100 company, which bottles Coca-Cola products in 28 countries, said its net sales revenue was up 6.0% on a currency-neutral basis, with reported net sales revenue rising by 2.1% to €6.66bn.

Currency-neutral revenue per case improved 1.7%, which the board said benefitted from its revenue growth management initiatives, including product innovation, price increases and a better package mix.

Net sales revenue per unit case on a reported basis fell by 2% to €3.04.

Its ‘established and developing’ segment countries improved their price-mix at a higher rate than in 2017, it explained.

In its ‘emerging’ segment, price-mix growth - up 2.4% - was a moderation from prior years, which Coca-Cola HBC put down to the cycling of 2016-2017 price increases in Nigeria, and lower premium spirits sales in Russia.

Volume growth accelerated to 4.2%, with growth in all segments, which was reportedly driven by sparkling beverages.

Looking closer at volume, the firm said it saw broad-based growth, with continued momentum in the ‘emerging and developing’ segment countries.

In Nigeria, volumes declined in what was described as a “very competitive” environment.

Volumes grew across all beverage categories including ready-to-drink tea, which returned to growth after the launch of the ‘FUZE’ brand.

Comparable EBIT was ahead 9.6% to €680.7m, with the company’s comparable EBIT margin up 70 basis points to 10.2%, and its reported margin up 60 basis points to 9.6%.

Key drivers of that margin growth included operating leverage from the benefits of revenue growth management and strong volume growth, as well as a 20 basis-point reduction in comparable operating expenses as a percentage of revenue, which the board described as a “good performance” in a year of continued investment in innovation and marketing.

Slightly favourable input costs, offset by the impact of adverse foreign exchange movements, were also a factor.

Comparable earnings per share were 5.9% higher, thanks to higher operating profitability, lower interest income and a higher effective tax rate, Coca-Cola HBC said.

Free cash flow stood at €370m, which consisted of a “strong” operating cash flow, offset by a €49m increase in net capital expenditure as the firm accelerated its investment in revenue-generating assets, as it had previously planned.

The board of Coca-Cola HBC proposed a 57 euro cent dividend per share, which would represent a 5.6% increase on the 2017 dividend.

“In 2018 we delivered another very good performance with revenue growth above our target range and another step up in margins,” said chief executive officer Zoran Bogdanovic.

“Strong volume growth in all our segments was helped by a record number of new product launches, whilst price-mix improved for the eighth consecutive year.

“This growth supported margin progress, which we delivered while increasing our investment in marketing.”

Bogdanovic said the company’s “sharp focus” on cost efficiencies had continued, while it invested in the business for growth.

“The shape of the business, capabilities and commitment of our people and our overall commercial proposition give us confidence in our ability to continue to grow revenues and margins.”