# Coca-Cola HBC deliver another solid performance, organic revenue up 15.3% - Link: https://www.directorstalkinterviews.com/coca-cola-hbc-deliver-another-solid-performance-organic-revenue-up-15.3/4121131318 - Published: 2023-10-31T07:33:53+00:00 - Author: Amilia Stone **Coca-Cola HBC AG** (LON:CCH), a growth-focused Consumer Packaged Goods business and strategic bottling partner of The Coca-Cola Company, has announced its Q3 2023 trading update. **Third quarter highlights** ·     **Another quarter of strong organic growth****^(1)****, driven by continued execution of our 24/7 strategy** o  Organic revenue up 15.3%; year-to-date organic revenue growth of 17.0% o  Organic volume growth of 2.2% was led by our strategic priority categories, with Sparkling +1.5%, Energy +24.8% and Coffee +33.5% o  Organic revenue per case growth of 12.9%, reflecting the cumulative benefits of revenue growth management initiatives over the last twelve months, across all categories and segments o  Reported revenue up 3.8%, with strong organic growth offset by FX headwinds in Emerging markets o  Further improvement in value share gains year-to-date; 110bps gain in Non-Alcoholic Ready-To-Drink (NARTD) and 60bps in Sparkling ·     **Segmental highlights: Broad-based organic revenue growth, with a particularly strong performance in Emerging ** o  **Established**: Organic revenue increased by 7.7%, led by revenue-per-case expansion, with a mixed volume performance against tough comparatives and varied weather conditions o  **Developing**: Organic revenue up 15.9%, with a strong volume performance in Energy and Coffee, partially offsetting weaker volumes in Sparkling, Water and Juices o  **Emerging**: Organic revenue up 21.8%, with a strong improvement in volume growth, notably in Egypt > **Zoran Bogdanovic, Chief Executive Officer of Coca-Cola HBC AG, commented:** > _“We’re pleased to have delivered another solid performance, and a second consecutive > quarter of organic volume growth. This was driven by our strong execution, underpinned > by a continued focus on our strategic priority categories of Sparkling, Energy > and Coffee, as well as our focus on bespoke capability development to drive personalised > execution for every outlet. Our sophisticated revenue growth management, powered > by data, insights and analytics, is helping us to adapt our initiatives and execution > to different consumer environments and successfully balance affordability and > premiumisation. As a result, we have both enhanced revenue per case and driven > higher levels of market share._ > _“We continue to invest in our future with a clear focus on delivering against > our [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news) > agenda. In Austria, we have introduced an industry-leading alternative to plastic > shrink film_ _for multipacks of multi-serve bottles, and in Romania, we have invested > in recycled PET capabilities to drive packaging circularity._ > _“We reiterate our guidance for strong growth in 2023 and, despite continued macro > uncertainties, we are well placed to deliver on our medium-term targets.”_ | Q3 2023 vs Q3 2022 | Net sales revenue | Volume | Net sales revenue per unit case | | growth (%) | Organic^(1) | Reported | Organic^(1) | Reported | Organic^(1) | Reported | | Total Group | 15.3 | 3.8 | 2.2 | 3.7 | 12.9 | 0.1 | | Established markets | 7.7 | 8.0 | -7.1 | -7.1 | 16.0 | 16.2 | | Developing markets | 15.9 | 19.9 | -2.6 | -2.6 | 19.0 | 23.1 | | Emerging markets | 21.8 | -5.1 | 7.9 | 10.6 | 12.8 | -14.2 | _^(1)__For details on APMs refer to ‘Alternative Performance Measures’ and ‘Definitions and reconciliations of APMs’ sections._ **Business outlook** Our performance in the third quarter was in line with expectations, underpinned by a second successive quarter of organic volume growth and despite tougher trading conditions in some markets. While we remain attentive to macroeconomic and geopolitical risks, we have a high degree of confidence in our broad 24/7 portfolio, the growth opportunities in our diverse markets, enhanced by our focus on execution and prioritised capabilities, and above all, the abilities of our talented people. Our expectations for 2023 are unchanged: ·     We continue to expect mid-teens full-year organic revenue growth ·     We continue to assume COGS/case increases by high-single digits in 2023, as inflationary pressures begin to moderate ·     We continue to expect organic EBIT growth in the range of 9% to 12% in 2023 **Technical guidance** Within our technical guidance we now expect a lower level of finance costs for 2023; elsewhere our expectations are unchanged. **FX:** We expect the impact of translational FX on our Group comparable EBIT to be a €50-60 million headwind. **Restructuring**: We do not expect significant restructuring initiatives to take place in 2023. **Tax**: We continue to expect our comparable effective tax rate to be at the top end of our 25% to 27% range. **Finance costs:** We now expect net finance costs for 2023 to be in the range of €50-60 million (previously €65-75 million). **Scope**: In 2023 we expect around a €45 million scope benefit to EBIT, reflecting the consolidation of Multon (from 11 August 2022) and the acquisition of Three Cents( from 21 October 2022). **Medium-term targets** As part of the evolution of our growth story, in May 2023 we updated our financial targets to cover the medium-term period beyond 2023. Alongside continued strong execution of our strategy, these targets reflect a positive outlook for our market categories and our expectation to gain further market share. ·     Average annual organic revenue growth of 6-7% (previously a target of 5-6% per annum) ·     Average annual organic EBIT margin expansion of 20-40 basis points per annum ·     Capital expenditure as a percentage of revenue in the range of 6.5-7.5% per annum ·     Continued focus on growing ROIC (2022: 14.1%) We also reaffirmed our commitment to a progressive dividend representing a pay-out ratio of between 40-50% of comparable Earnings Per Share per annum, supported by our delivery of growth in free cash flow in the mid-term. We also reaffirmed our target of maintaining a ratio of net debt to EBITDA in the range of 1.5 to 2 times. **Operational highlights** **Leveraging our unique 24/7 portfolio** Third quarter organic revenue grew by 15.3%, with growth in volumes, price and mix. Reported net sales revenue increased by 3.8%, with FX headwinds in Nigeria, Russia and Egypt offsetting strong organic growth across the group. Volumes grew by 2.2% on an organic basis in the quarter, propelled by our strategic priority categories of Sparkling, Energy and Coffee. These categories remain less elastic and are facing less pressure from private label than other areas of NARTD. ·     Sparkling volumes grew by 1.5%. Highlights included an improved performance in Adult Sparkling, with mid-single digit growth, driven by Established and Emerging. Coke Zero was the best performing Trademark Coke variant, supported by a good performance of Coke Zero Sugar Zero Caffeine. Sprite also performed well, up low-single digits, driven by Developing and Established. ·     Energy volumes grew by 24.8%, with good momentum across all segments. In Established and Developing markets, growth continued to be driven by Monster, while in Emerging growth was led by Burn and Predator. ·     Coffee volumes grew 33.5%, with growth above 20% in all three segments. Progress in the out-of-home channel remains our priority for both Costa Coffee and Caffè Vergnano, and in Q3 we continued to recruit more outlets. ·     Still volumes grew by 0.9%, despite high-single digit and double-digit declines in Established and Developing respectively, as we consciously chose to focus on the opportunities for the most profitable revenue growth in the Water category. In Sports Drinks we delivered high-single digit growth. **Winning in the marketplace** Organic net sales revenue per case expanded by 12.9%, a slowdown from the 19.0% growth in H1. We continued to benefit from pricing taken in the previous twelve months, as well as a positive contribution from mix. However, as expected, there was a lower contribution from incremental pricing, as the need for further price increases in the quarter were limited, reflecting lower levels of cost inflation. Our revenue growth management initiatives, powered by our focused ongoing investment in data, insights and analytics, have allowed us to make conscious decisions to enhance revenue per case across our markets, while addressing both affordability and premiumisation. Compared to 12 months ago affordability is in greater focus, particularly in Romania, Hungary and Czech, where there is a more notable pressure on consumer disposable income. In all our markets we address affordability by utilising the strength of our broad portfolio of brands, to offer single-serve and entry packs, and by continuing to improve the return on promotions. Our targeted actions drove positive category and package mix. Category mix benefitted mainly from the increased contribution of Adult Sparkling and Energy. Package mix improved due to good activation of single-serve offerings, which improved single- serve mix by 90 basis points, with gains across all three segments. Good performance in the out-of-home channel ensured our teams operated effectively through the summer season, despite short-term challenges driven by weather. Year- to-date we gained 110 basis points of value share in NARTD and 60 basis points in Sparkling. This improved performance benefitted from our core focus of driving joint value with customers. **Earning our licence to operate** In Q3, we expanded our industry-leading pilot to launch a cardboard-based alternative to plastic shrink film for 1.5 litre PET multipacks in Austria. As a result, we expect it to initially save around 200 tonnes of plastic per year. We also invested €11m in new equipment in Romania to produce recycled PET (rPET) in-house. In September, we issued our first Green Finance Report, detailing how we have used the proceeds of our inaugural €500m green bond and its environmental impact, with approximately 60% allocated to circular economy projects and 40% to energy efficiency projects. **Established markets ** Established markets net sales revenue grew by 7.7% and 8.0% on an organic and reported basis respectively. Organic net sales revenue per case increased by 16.0%, with pricing benefitting from actions taken in all markets over the last twelve months, as well as targeted initiatives to drive mix. Category mix improved with a good performance from Adult Sparkling as well as Energy. We drove another quarter of strong improvement in package mix, supported by further activations of single-serve formats. Volume in the segment declined by 7.1%. Sparkling volumes declined high-single digits, as we intentionally focused on revenue per case expansion. Within that, Adult Sparkling grew by mid-single digits. Energy also delivered mid-single digit growth despite strong comparatives. Stills volumes declined by high-single digits, reflecting the conscious choices to prioritise revenue growth in Water, which resulted in a weak volume performance in the category. In Greece, volumes grew by mid-single digits, benefitting from carefully planned execution in a strong tourist season. Low-single digit growth in Sparkling was led by Coke Zero and Adult Sparkling, which benefitted from strong seasonal activation and good performance in the out-of-home channel. Energy continued its momentum with strong double-digit growth. In Ireland, volumes declined by low-single digits, impacted by mixed weather and strong comparatives. Sparkling volumes declined low-single digits, partially offset by Coke Zero growth of mid-single digits. Energy delivered solid growth in the quarter. Water declined by low-teens in the period. In Italy, volumes declined by high-teens, driven by ongoing declines in Water and challenging weather conditions, coupled with strong comparatives. Water contracted by over 30%, as we made deliberate choices to focus on profitable revenue growth. While Adult Sparkling grew by mid-single digits, on the back of the successful Kinley re-launch, Sparkling volumes overall fell by low-teens. In Switzerland, volumes declined by low-single digits as we cycled a very strong summer period. Sparkling volumes fell by low-single digits, while Energy delivered strong growth above 50%. In Stills, Water saw modest growth while Ready-To-Drink Tea declined double-digits. **Developing markets** Developing markets net sales revenue grew by 15.9% and 19.9%, on an organic and reported basis respectively, benefitting from positive foreign currency movements from the Polish Zloty and Hungarian Forint. Organic net sales revenue per case increased by 19.0%, while reported net sales revenue per case increased by 23.1%. Pricing initiatives taken over the previous twelve months were the main driver of revenue per case expansion in Q3. Category mix and package mix were also positive in the quarter, driven by Energy and further improvement of single-serve mix. Developing markets volumes declined by 2.6%, similar to Q2, driven by a low-single digit decline of the Sparkling category. Energy delivered another strong performance with volumes up high-teens, while Coffee continued to deliver strong double-digit growth. Stills volumes were down by mid-teens led by the Water category. In Poland, volumes declined low-single digits, driven by Water, which was over 30% lower. Sparkling was broadly unchanged year-on-year, but we drove low-double digit growth in Coke Zero. Energy and Coffee continued their strong momentum, growing mid-teens and over 50% respectively. In Hungary, volumes declined by high-single digits, against a still-tough inflationary environment for the consumer. This environment impacted Stills more than Sparkling, and we saw Stills decline over 20%, led by Water and Juice. Sparkling volumes were down low-single digits in the period. Volume in the Czech Republic decreased by low-double digits, with declines in both Sparkling and Stills categories, albeit improving on Q2. Energy delivered solid growth in the period, with volumes up high-single digits, driven by Monster while Coffee continued its strong momentum, with volumes growing above 20%. **Emerging markets** Net sales revenue grew by 21.8% on an organic basis and declined by 5.1% on a reported basis, with the difference due to an adverse currency impact from the Nigerian Naira, Russian Rouble and Egyptian Pound. Net sales revenue per case grew 12.8% organically, benefitting from pricing actions taken over the last twelve months, including additional increases during the period to manage currency devaluation in Nigeria. Emerging markets volumes grew 7.9% organically and 10.6% on a reported basis, including the consolidation of Multon. Sparkling volumes grew by mid-single digits and Stills grew by low-double digits, mainly driven by a strong performance of Water in Egypt. Energy delivered growth of almost 40% in the quarter, continuing the momentum from prior periods. Volumes in Nigeria grew by mid-single digits, led by Sparkling with Trademark Coke brands up low-teens. Energy continued to deliver strong double-digit volume growth driven by Predator. Stills volumes were down by low-teens, led by Water, as we focused on profitable revenue growth. Volume in Ukraine declined by low-single digits in the period, reflecting tougher comparatives and operational challenges created by the ongoing conflict. Sparkling fell mid-single digits, while Energy delivered strong double-digit growth. Volume in Romania declined by low-teens in the quarter, with a mid-teens decline in Stills and low-teens decline in Sparkling, as the consumer environment remained challenging, with ongoing inflation and higher value-added taxes. Energy continued its strong momentum with volumes up low-twenties, driven by Monster. Volume grew by high-teens in Egypt. Sparkling grew by high-single digits, driven by Trademark Coke, which delivered mid-teens growth, with particularly strong growth for Coke Zero. Water delivered strong double-digit growth, on soft comparatives. We are also very pleased with progress of our recent launches in the Energy category. Volumes in Serbia declined by low-single digits, mainly driven by Sparkling, as we faced tougher trading conditions amidst greater volatility in the region. Trademark Coke fell high single-digits, while Adult Sparkling grew mid-single digits. Energy delivered mid-teens growth in the period, despite tough comparatives. Water volumes were up high-single digits. Russia volumes were higher on an organic basis compared to the prior-year quarter, but on the same basis were down around 40% compared to the same period in 2021. **Supplementary information** | | Third quarter | Nine months | | Group | 2023 | 2022 | %Reported | %Organic^(2) | 2023 | 2022 | %Reported | %Organic^(2) | | Volume (m unit cases)^(3) | 785.2 | 757.5 | 3.7% | 2.2% | 2,168.3 | 2,087.7 | 3.9% | 0.1% | | Net sales revenue (€ m) | 2,797.8 | 2,695.7 | 3.8% | 15.3% | 7,819.3 | 6,905.6 | 13.2% | 17.0% | | Net sales revenue per unit case (€) | 3.56 | 3.56 | 0.1% | 12.9% | 3.61 | 3.31 | 9.0% | 16.8% | | Established markets | | | | | | | | | | Volume (m unit cases) | 182.8 | 196.8 | -7.1% | -7.1% | 489.2 | 502.5 | -2.6% | -2.7% | | Net sales revenue (€ m) | 959.5 | 888.7 | 8.0% | 7.7% | 2,587.5 | 2,272.9 | 13.8% | 13.3% | | Net sales revenue per unit case (€) | 5.25 | 4.52 | 16.2% | 16.0% | 5.29 | 4.52 | 16.9% | 16.5% | | Developing markets | | | | | | | | | | Volume (m unit cases) | 129.5 | 133.0 | -2.6% | -2.6% | 356.8 | 363.4 | -1.8% | -1.8% | | Net sales revenue (€ m) | 593.4 | 494.9 | 19.9% | 15.9% | 1,578.6 | 1,286.5 | 22.7% | 20.6% | | Net sales revenue per unit case (€) | 4.58 | 3.72 | 23.1% | 19.0% | 4.42 | 3.54 | 25.0% | 22.8% | | Emerging markets | | | | | | | | | | Volume (m unit cases) | 472.9 | 427.7 | 10.6% | 7.9% | 1,322.3 | 1,221.8 | 8.2% | 1.8% | | Net sales revenue (€ m) | 1,244.9 | 1,312.1 | -5.1% | 21.8% | 3,653.2 | 3,346.2 | 9.2% | 18.3% | | Net sales revenue per unit case (€) | 2.63 | 3.07 | -14.2% | 12.8% | 2.76 | 2.74 | 0.9% | 16.1% | _^(2)__For details on APMs refer to ‘Alternative Performance Measures’ and ‘Definitions and reconciliations of APMs’ sections._ _^(3)__One unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. For Premium Sprits volume, one unit case also corresponds to 5.678 litres. For biscuits volume, one unit case corresponds to 1 kilogram. For coffee volume, one unit case corresponds to 0.5 kilograms or 5.678 litres._ **Conference call** Coca-Cola HBC will host a conference call for financial analysts and investors to discuss the 2023 third quarter trading update on Tuesday 31 October 2023 at 9:30 am GMT. To join the call in listen-only mode please join via the [webcast](https://edge.media-server.com/mmc/p/2aydgous). If you anticipate asking a question, please [click here](https://services.choruscall.it/DiamondPassRegistration/register?confirmationNumber=9748900&linkSecurityString=ae9d4d020) to register and to find dial-in details. Share on: