DELIVERING RESULTS THROUGH OPERATIONAL FOCUS

DELIVERING RESULTS THROUGH OPERATIONAL FOCUS

Coca-Cola HBC AG, the second largest bottler of the brands of The Coca-Cola Company, reports its financial results for the full year ended 31 December 2014.

 

Fourth quarter and full-year highlights

·    Volumes increased in the quarter compared to the prior-year quarter, with good performances in Russia, Nigeria, Poland, Austria and Greece; all three segments beat their nine-month volume trend, resulting in overall full-year volumes slightly better than expected

·    Volume and value share continued to grow in the fourth quarter in the majority of our countries, ending the full year with higher or stable share in 16 markets in Sparkling beverages and in 10 markets in NARTD¹

·    In the fourth quarter, FX-neutral net sales revenue per unit case continued to improve, albeit at a slightly slower pace than in the first nine months, bringing the full-year increase to 2.5%

·    In the quarter, more favourable input costs than expected in the quarter partly compensated for the significant adverse movements in currencies seen  since the latter part of November, which exceeded our expectations by €15 million

·    Persistent adverse currency movements and subdued volumes in the year were partly offset by revenue growth initiatives including pricing and improved package mix as well as favourable input costs, resulting in lower comparable EBIT than in the prior year; broadly stable comparable EBIT margin year on year

·    Comparable EPS - down 5.6% in the year - benefited from the refinancing of debt in 2013

·    The Board of Directors proposes a 0.36 Euro dividend per share (2013: 0.354 Euro)

	Q4	Q4	Change
	2014	2013
Volume (m unit cases)	485.1	481.1	0.8%
Net Sales Revenue (€ m)	1,510.0	1,574.6	-4.1%
Net Sales Revenue per Unit Case (€)	3.11	3.27	-4.9%
Currency Neutral Net Sales Revenue per Unit Case (€)	3.11	3.05	2.0%
Comparable EBIT (€ m)	56.9	68.3	-16.7%
Comparable EBIT margin (%)	3.8	4.3	-50bps
Comparable Net Profit* (€ m)	30.4	34.3	-11.4%
Comparable EPS (€)	0.083	0.094	-11.7%
	Full Year	Full Year	Change
	2014	2013
Volume (m unit cases)	2,002.9	2,060.5	-2.8%
Net Sales Revenue (€ m)	6,510.2	6,874.0	-5.3%
Net Sales Revenue per Unit Case (€)	3.25	3.34	-2.7%
Currency Neutral Net Sales Revenue per Unit Case (€)	3.25	3.17	2.5%
Comparable EBIT (€ m)	424.7	453.9	-6.4%
Comparable EBIT margin (%)	6.5	6.6	-10bps
Comparable Net Profit* (€ m)	277.4	293.1	-5.4%
Comparable EPS (€)	0.761	0.806	-5.6%

* Comparable Net Profit refers to comparable net profit after tax attributable to owners of the parent.         

 

Dimitris Lois, Chief Executive Officer of Coca-Cola HBC AG, commented:

"Our business, with its strategy focused on execution in the markets, has delivered in a difficult year. We have won share, protected our margin and generated solid free cash flow.

"In 2015, we will continue to pursue our strategy with a wide range of planned actions, from improving volumes through marketing initiatives and focusing on affordability to our proven self-help efficiency measures. These efforts, along with materially reduced input costs, will help to mitigate the negative impacts of currency volatility, and related uncertainty in some key markets. We anticipate a challenging year and are optimistic that our business will prove its strengths in adversity."           

¹ Nielsen December data based on 24 measured markets in Sparkling beverages and 21 measured markets in NARTD; NARTD: non-alcoholic ready-to-drink

 

SPECIAL NOTE REGARDING THE INFORMATION SET OUT HEREIN

Unless otherwise indicated, the condensed consolidated financial statements and the financial and operating data or other information included herein relate to Coca-Cola HBC AG and its subsidiaries
("Coca-Cola HBC" or the "Company" or "we" or the "Group").

This document contains forward-looking statements that involve risks and uncertainties. These statements may generally, but not always, be identified by the use of words such as "believe", "outlook", "guidance", "intend", "expect", "anticipate", "plan", "target" and similar expressions to identify forward-looking statements. All statements other than statements of historical facts, including, among others, statements regarding our future financial position and results, our outlook for 2015 and future years, business strategy and the effects of the global economic slowdown, the impact of the sovereign debt crisis, currency volatility, our recent acquisitions, and restructuring initiatives on our business and financial condition, our future dealings with The Coca-Cola Company, budgets, projected levels of consumption and production, projected raw material and other costs, estimates of capital expenditure, free cash flow, effective tax rates and plans and objectives of management for future operations, are forward-looking statements. You should not place undue reliance on such forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect our current expectations and assumptions as to future events and circumstances that may not prove accurate. Our actual results and events could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in the UK Annual Financial Report for Coca-Cola HBC AG and its subsidiaries for the year ended 31 December 2013.

Although we believe that, as of the date of this document, the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we, nor our directors, employees, advisors nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. After the date of the condensed consolidated financial statements included in this document, unless we are required by law or the rules of the UK Financial Conduct Authority to update these forward-looking statements, we will not necessarily update any of these forward-looking statements to conform them either to actual results or to changes in our expectations.

 

 

Reconciliation of Reported to Comparable Financial Indicators (numbers in € million except per share data)

Group Financial Results	Fourth quarter 2014
	COGS1	Gross  Profit2	Operating Expenses3	EBIT4	Adjusted EBITDA5	Finance Costs6	Net Profit7	EPS8 (€)
Reported	(1,007.0)	503.0	(461.1)	17.2	129.4	(18.4)	66.5	0.182
Restructuring costs9	-	-	-	24.7	4.4	-	26.6	0.073
Commodity hedging10	15.0	15.0	-	15.0	15.0	-	10.6	0.029
Non-recurring items11	-	-	-	-	-	-	(73.3)	(0.201)
Comparable	(992.0)	518.0	(461.1)	56.9	148.8	(18.4)	30.4	0.083
Group Financial Results	Fourth quarter 2013
	COGS1	Gross  Profit2	Operating Expenses3	EBIT4	Adjusted EBITDA5	Finance Costs6	Net Profit7	EPS8 (€)
Reported	(1,040.3)	534.3	(469.0)	34.1	132.4	(23.5)	8.4	0.023
Restructuring costs	-	-	-	31.2	22.9	-	23.6	0.065
Commodity hedging10	3.0	3.0	-	3.0	3.0	-	2.3	0.006
Comparable	(1,037.3)	537.3	(469.0)	68.3	158.3	(23.5)	34.3	0.094
Group Financial Results	Full Year 2014
	COGS1	Gross  Profit2	Operating Expenses3	EBIT4	Adjusted EBITDA5	Finance Costs6	Net Profit7	EPS8 (€)
Reported	(4,192.5)	2,317.7	(1,901.4)	361.1	742.1	(72.9)	294.8	0.809
Restructuring costs9	-	-	-	55.2	34.2	-	50.4	0.138
Commodity hedging10	8.4	8.4	-	8.4	8.4	-	5.5	0.015
Non-recurring items11	-	-	-	-	-	-	(73.3)	(0.201)
Comparable	(4,184.1)	2,326.1	(1,901.4)	424.7	784.7	(72.9)	277.4	0.761
Group Financial Results	Full Year 2013
	COGS1	Gross  Profit2	Operating Expenses3	EBIT4	Adjusted EBITDA5	Finance Costs6	Net Profit7	EPS8 (€)
Reported	(4,438.5)	2,435.5	(2,006.3)	373.7	756.1	(91.5)	221.2	0.608
Restructuring costs	-	-	-	55.5	41.8	-	42.7	0.118
Commodity hedging10	5.5	5.5	-	5.5	5.5	-	4.1	0.011
Non-recurring items12	-	-	19.2	19.2	19.2	8.1	25.1	0.069
Comparable	(4,433.0)	2,441.0	(1,987.1)	453.9	822.6	(83.4)	293.1	0.806

¹   Reported COGS refers to cost of goods sold.

²   Reported Gross Profit refers to gross profit.

³   Reported Operating Expenses refers to operating expenses.

⁴   Reported EBIT refers to operating profit.

⁵   Adjusted EBITDA refers to operating profit before deductions for depreciation and impairment of property, plant and equipment (included both in cost of goods sold and in operating expenses), amortisation and impairment of intangible assets, employee share options and other non-cash items, if any (refer to 'Supplementary information' section).

⁶   Reported Finance Costs refers to total net finance costs.

⁷   Reported Net Profit refers to profit after tax attributable to owners of the parent.

⁸   Reported EPS refers to basic earnings per share.

⁹     Net profit includes also restructuring within joint ventures of €6.5 million.

¹⁰ The Group has entered into certain commodity derivative transactions in order to mitigate its exposure to commodity price risk. Although these transactions are economic hedging activities that aim to manage our exposure to sugar and aluminium price volatility, they do not qualify for hedge accounting. The fair value gains and losses on the derivatives are immediately recognised in the income statement in the cost of goods sold line item. The Group's comparable results exclude the unrealised gains or losses resulting from the mark-to-market valuation of this hedging activity. These gains or losses will be reflected in the comparable results in the period when the underlying transactions will occur, to match the profit or loss impact of the underlying transactions.

¹¹ Non-recurring items refer to the gain included within our share of results of equity method investments from the sale of Zagorka by Brewmasters Holdings Ltd, subsidiary of Brewinvest S.A. joint venture with Heineken of €59.9 million and one-off credits to income tax of €13.4 million.  

¹² Non-recurring items refer mainly to the transactions costs related to the re-domiciliation and the admission of the Group to listing on the premium segment of the London Stock Exchange. Further to that, non-recurring finance costs also relate to the tender offer for the €500 million bond matured in January 2014.

 

 

Group Operational Review

In the fourth quarter, sharp depreciation of currencies in some of our biggest markets and the worsening macroeconomic outlook due to the decline in the oil price added to the challenges we faced this year. Our volume grew in the quarter and we are pleased to have delivered better than expected volume growth in all segments, owing to successful commercial activation. We also maintained good levels of profitability as a result of our ongoing actions to improve net sales revenue per case and the favourable input costs environment.

Our commercial strategy also enabled us to improve our position in many of our markets. We gained or maintained share in volume and value in 16 markets¹ in Sparkling beverages and 10 markets¹ in NARTD in the year. The biggest improvements were in Austria, Ireland, Romania, Russia and Serbia.

Volume performance

Volumes increased by just under 1% in the quarter, reducing the rate of decline for the year to 2.8%. The decline in our Established markets volumes decelerated to 2.8% in the quarter, bringing the full-year decline to 5.4%. The weakness seen in the first nine months in Italy, and to some extent in Switzerland, has continued, while volumes in Greece and Ireland showed improvement, mainly as a result of good performance in the water category. Volume returned to growth in the Developing markets in the quarter after nearly two years of decline. Volumes in this segment were up 1.4% in the quarter, helped by good Sparkling performance in Hungary and improving volumes in Poland, where we have started cycling the early stages of our value-accretive volume strategy. Developing markets closed the year with an overall 6.0% decline. Quarterly performance in Emerging markets - up 2.8% - was the result of good performances in Nigeria, and Russia, the latter also benefiting from Juice outperformance, partly driven by increased Moya Semya distribution. Romania on the other hand, continues to be impacted by a declining market. Buoyed by the positive developments in the last quarter, Emerging markets volumes were stable overall in the year, despite the worsening macroeconomic conditions in a number of countries in the segment.

Category performance

Sparkling beverages volumes were stable on a strong quarter in the prior year, supported by good contributions from Nigeria, Russia, Poland and Hungary, which helped offset the poor performance in Italy, Romania and Switzerland. Within the category, Trademark Coca-Cola was stable, supported by 8.4% growth in Coke Zero, which continued to outperform the sparkling category. Fanta volumes were up by 4.7%, while Sprite declined by 2.4%. The full-year decline for Sparkling beverages was 3.3%.

Juice accelerated its growth trend in the quarter. Increased distribution of our newly listed Moya Semya juice brand in Russia and continued growth of Cappy Pulpy benefitted the category, which grew by 10.2% in the quarter and 5.4% in the full year. Fourth quarter volumes were up 0.9% in Water, helped by positive contributions from Greece, Austria and Poland, although with continued SKU rationalisation in some of our big countries, Water volumes contracted in the full year. Energy increased marginally in the quarter, driven by strong performance in Established markets, offsetting the weakness in Developing markets. Ready-to-Drink Tea performance was weak across the board, with volumes declining by 2.7% in the quarter.

Package mix improved by 0.2 percentage points in the quarter as a result of the volume of beverages sold in single-serve packages increasing by 1.3%, while multi-serve packages increased by 0.5%. This is the seventh quarter of improvement in package mix, with the biggest contributions coming from Water and Sparkling single-serve packages. All segments achieved better package mix in the year, and share of single-serve beverages has now reached 43% for Sparkling and 40% for the portfolio overall.

We distribute certain premium spirits brands in twelve of our markets. Our primary brand partners are Brown Forman Corporation and The Edrington Group. Our Premium Spirits business typically grows at higher rates than our non-alcoholic beverage portfolio and generated revenues of €198.9 million in 2014. This business helps us to accelerate the growth of our single-serve NARTD business by strengthening our customer relationships and by allowing us to better address important adult consumption occasions through mixing promotions.

¹ Nielsen December data based on 24 measured markets in Sparkling beverages and 21 measured markets in NARTD ; NARTD: non-alcoholic ready-to-drink

 

Key financials

A 2.0% increase in currency-neutral net sales revenue per case marked the 14^th consecutive quarter of growth.

Net sales revenue declined by 4.1% in the quarter and 5.3% in the full year, ending the year at €6.5 billion. The significant foreign currency translation impact and the volume shortfall were only partly offset by the revenue growth initiatives including pricing taken during the year.

As oil prices hit new lows in the fourth quarter, our business benefited from lower PET resin costs. The result was a 7% decline in currency-neutral input cost per case in the quarter, reflected in all three market segments. Overall in the year, currency-neutral input cost per case declined by just under 5%.

We achieved further savings in operating costs in the quarter; however the impact of increased marketing investment in some of our countries and certain one-off items resulted in a 75 basis point deterioration in operating expense as a percentage of net sales revenue. In the full year, operating expense as a percentage of net sales revenue deteriorated by 30 basis points.

We delivered comparable EBIT amounting to €56.9 million in the quarter, translating to a 50 basis point contraction in EBIT margin. EBIT growth in Established and Developing markets only partly offset the decline in Emerging markets. Comparable EBIT for the full year was €424.7 million, compared to €453.9 million in 2013, and EBIT margin remained broadly stable on a year-on-year basis. Positive pricing and favourable input costs were not enough to offset the adverse impact of currency movements, which reached €100 million in the full year, volume decline and the concentrate cost increase.

We incurred €31.2 million in pre-tax restructuring charges in the quarter. For the full year pre-tax restructuring costs amounted to €61.7 million, the majority of which was due to planned restructuring actions in the Established segment. We continue to execute on our restructuring plans ultimately creating a more agile and efficient organisation.

As announced during our third quarter results, we sold to Heineken our interest in the Bulgarian brewery Zagorka A.D. Zagorka was a non-core investment, managed separately from our NARTD business in Bulgaria, and was accounted for on an equity accounting basis. The gain was treated as a non-recurring item and not included in our comparable financial indicators.

We generated free cash flow of €332.7 million in the full year which was €80.0 million lower than in the prior year. The key driver for the deterioration was the slowing pace of improvement in working capital. This follows five years of steady improvement in this key performance measure and reflects the reduced scope for further significant change. Working capital fundamentals remain intact as both the balance sheet working capital position at the end of December 2014 and the working capital days improved compared to the prior year.

At €277.4 million, comparable net profit for the year was 5.4% lower compared to the prior year.  Comparable earnings per share were 0.761 Euros.

In line with our progressive dividend policy, the Board of Directors proposes a full-year dividend of 0.36 Euros per share. The dividend payment will be subject, among other things, to shareholders' approval at our 2015 annual general meeting.

 

Operational Review by Reporting Segment
Established markets
	Q4 2014	Q4 2013	Change	Full Year	Full Year	Change
				2014	2013
Volume (m unit cases)	142.1	146.2	-2.8%	615.2	650.6	-5.4%
Net sales revenue (€ m)	560.5	554.6	1.1%	2,448.9	2,539.6	-3.6%
Net Sales Revenue per Unit Case (€)	3.94	3.79	4.0%	3.98	3.90	2.1%
Currency Neutral Net Sales Revenue per Unit Case (€)	3.94	3.82	3.1%	3.98	3.92	1.5%
Operating profit / (loss)  (EBIT in € m)	13.5	(16.8)	n/a	123.7	88.6	39.6%
Comparable operating profit (Comparable EBIT in € m)	17.0	13.7	24.1%	146.7	149.6	-1.9%
Comparable EBIT margin (%)	3.0	2.5	50bps	6.0	5.9	10bps

 

§ Unit case volume decline in our Established markets segment was 2.8% in the fourth quarter, bringing the full-year decline to 5.4%. This follows a stable performance and a 4.2% decline in the respective prior-year periods. Volume grew in the majority of our countries in the segment, supported by good performance in Water, although this was outweighed by declines in Italy and Switzerland. 

§ Net sales revenue grew by 1.1% in the quarter. The volume shortfall and negative category mix were more than offset by the benefits of favourable price and package mix, as well as the positive currency impact. Growth in currency-neutral revenue per case accelerated, rising by 3.1% in the quarter and by 1.5% in the full year.

§ Volume decline in Italy moderated to high single digits in the fourth quarter, cycling a low single-digit decline in the prior-year period and resulting in a 10% decline in the full year. The underlying trading environment remains challenging with unemployment at near record high levels of 13% and disposable income still under pressure. At the same time, we continue to see volume impact on our business from tighter liquidity in the trade. As a result, volume pressure was evident across all brands and categories, with only Coke Zero and Energy registering positive performances. Single-serve contribution increased in the quarter, driven by Water packages.

§ Volume in Greece maintained the positive momentum and increased by low single digits in the fourth quarter, cycling a low single-digit decline in the prior-year quarter. Volume in the full year grew by 2%, leading to the first annual volume growth since 2008, with Water being the key growth driver in the country. Coke Zero grew by 7% in the quarter, and Energy continues to build its base growing by 8%. Looking ahead, whilst we are pleased to see improving volume trends in Greece, we remain cautious. The macroeconomic environment remains fragile and contingent on political developments. Trading conditions are still challenging; and unemployment remains at near historic highs of 26%.

§ Volume in Switzerland declined by mid single digits in the fourth quarter and by 7% in the full year, cycling a low single-digit increase in both respective prior-year periods. Water recovered in the quarter growing by 2%, helped by strong performance in single-serve packs and increased distribution, although this was not enough to offset the Sparkling volume decline. Overall, despite Sparkling being the main underperformer in the full year, we gained volume share in the category. Package mix improved in both the sparkling and water categories for both periods.

§ Volume trends in Ireland remained volatile, with volume increasing by low single digits in the quarter, cycling a mid single-digit increase in the prior-year quarter. Volume was stable in the full year. In the quarter volume grew in all key categories, with the exception of Juice which is cycling a 24% increase in the prior-year quarter. Within the sparkling category, Coke Zero and Sprite maintained their double-digit growth momentum, while Water growth accelerated. Package mix improved in the quarter driven by good performance of single-serve multi-packs in Sparkling.

§ Comparable operating profit in the Established markets segment improved by 24.1% to €17.0 million in the fourth quarter. In the quarter, benefits from our revenue growth management, optimisation initiatives supported by restructuring, as well as lower input costs more than offset the impact of lower volume and the concentrate cost increase. Comparable operating profit in the full year was €146.7 million, which is €2.9 million lower than in the prior year. The negative volume impact and concentrate cost increase, offset  the benefit from revenue growth management initiatives including pricing, lower input costs and  benefits from restructuring and lower operating expenses.

 

 

Developing markets
	Q4	Q4	Change	Full Year	Full Year	Change
	2014	2013		2014	2013
Volume (m unit cases)	87.8	86.6	1.4%	358.3	381.0	-6.0%
Net sales revenue (€ m)	246.2	246.7	-0.2%	1,054.1	1,105.6	-4.7%
Net Sales Revenue per Unit Case (€)	2.80	2.85	-1.8%	2.94	2.90	1.4%
Currency Neutral Net Sales Revenue per Unit Case (€)	2.80	2.79	0.4%	2.94	2.86	2.8%
Operating (loss) / profit (EBIT in € m)	(3.1)	(1.5)	>100%	52.0	36.6	42.1%
Comparable operating profit (Comparable EBIT in € m)	2.8	0.2	>100%	57.9	41.6	39.2%
Comparable EBIT margin (%)	1.1	0.1	100bps	5.5	3.8	170bps

 

§ Unit case volume in our Developing markets segment returned to growth in the fourth quarter, increasing by 1.4%. This was outweighed by declines in the previous three quarters, resulting in a 6.0% decline in the full year. This follows declines of 5.1% and 3.2% in the respective prior-year periods. Volume performance in the segment was driven by Trademark Coke in Poland, Hungary and the Czech Republic.

§ Net sales revenue was broadly stable in the quarter. Benefits of improved volume, category and price mix were offset by unfavourable channel mix and negative currency impact. On a currency-neutral basis, net sales revenue per unit case increased by 0.4% in the fourth quarter and 2.8% in the full-year period.

§ In Poland, volume increased by mid single digits in the fourth quarter while it declined by 7% in the full-year period. This follows a high single-digit decline and a 3% decline in the respective prior-year periods. Volume in the quarter increased across all categories with the exception of Juice, while Sparkling beverages grew by mid single digits, driven by good results in the organised trade. Still beverages posted a mid single-digit increase driven by fragmented trade performance. Package mix deteriorated by 1.1 percentage points in the quarter, driven by the strong performance of Sparkling multi-serve packages in the discounters channel.

§ Volume in Hungary increased by low single digits in the quarter, cycling a low single-digit decline in the prior-year period. For the full-year period volume declined by 1%, cycling a 6% decline in the prior year. Sparkling beverages increased by high single digits, with positive performance across almost all categories and continued strong double-digit growth in Coca-Cola Zero. Volume in Energy maintained the positive trend and grew by high teens, cycling very strong growth in the prior-year period and reflecting the solid performance of our new product and flavour launches. Juice volumes were stable, helped by the growth of Cappy Pulpy. In line with our focus to increase single-serve contribution, package mix improved by 1.7 percentage points in the quarter, driven by increased volume of single-serve packages in the sparkling beverages category.

§ In the Czech Republic volume was stable in the quarter, bringing the full-year rate of decline to 11%. In a year shaped by our strategic decision to focus on value-accretive volume, the strong performance in Trademark Coke in the fourth quarter boosted volumes to some degree. Sparkling increased by low single digits, while Water recorded a mid single-digit decline due to lower promotional activity. Package mix improved by 0.4 percentage points in the quarter, driven by the increased contribution of single-serve packages in the sparkling beverages category.

§ Developing markets posted a €2.6 million increase in comparable operating profit to €2.8 million in the fourth quarter. Favourable price/mix, lower input costs and improved volume more than offset the impact of higher concentrate costs and marketing expenses, and the negative impact of foreign exchange movements. In the full year, comparable operating profit increased by €16.3 million to €57.9 million, as improved price mix, lower input costs and lower operating expenses, more than offset the negative effect of lower volume, concentrate price increase and adverse foreign exchange movements.

 

Emerging markets
	Q4	Q4	Change	Full Year		Full Year	Change
	2014	2013		2014	2013
Volume (m unit cases)	255.2	248.3	2.8%	1,029.4	1,028.9		-
Net sales revenue (€ m)	703.3	773.3	-9.1%	3,007.2	3,228.8		-6.9%
Net Sales Revenue per Unit Case (€)	2.76	3.11	-11.3%	2.92	3.14		-7.0%
Currency Neutral Net Sales Revenue per Unit Case (€)	2.76	2.68	3.0%	2.92	2.82		3.5%
Operating profit (EBIT in € m)	6.8	52.4	-87.0%	185.4	248.5		-25.4%
Comparable operating profit (Comparable EBIT in € m)	37.1	54.4	-31.8%	220.1	262.7		-16.2%
Comparable EBIT margin (%)	5.3	7.0	-170bps	7.3	8.1		-80bps

 

§ Unit case volume in our Emerging markets segment grew by 2.8% in the fourth quarter, resulting in stable performance for the full year. This follows increases of 3.6% and 1.7% respectively in the prior-year periods. Volume performance in the quarter was driven by sustained growth momentum in Nigeria, combined with a sequential improvement in Russia and positive performance from Ukraine, which more than offset the weak volumes in Romania.

§ Net sales revenue declined by 9.1% in the fourth quarter and 6.9% in the full year. Benefits of improved volume, positive pricing and category mix in the quarter only partly compensated for the substantial negative impact from currency movements and negative channel mix. Currency-neutral revenue per case grew by 3.0% in the quarter, sustaining the good performance seen in the first nine months of the year, while for the full-year currency-neutral revenue per case grew by 3.5%.

§ Volume in Russia resumed the growth momentum and increased by mid single digits in the fourth quarter, following a high single-digit increase in the prior-year period. Volume for the full year increased by 1%, following a 5% increase in the prior-year period. Performance was positive despite the continued adverse geopolitical developments and general macroeconomic trends which had a negative effect on disposable income. Sparkling increased by 3% and Trademark Coca-Cola by 7%, supported by improved volume in the organised trade and successful trade activations. Positive performance from Sparkling was augmented by impressive growth in the juice category. Juice volumes grew by high teens in the quarter, supported by high single-digit volume growth in our mainstream brand Dobry and the inclusion of the Moya Semya brand in the portfolio. In the full year, we expanded our volume and value share in Juice.

§ In Nigeria, we maintained the volume growth momentum seen in the previous quarter, delivering high single-digit growth in the fourth quarter despite cycling a high single-digit growth rate. In the full year, volume increased by 4%. Strong execution helped Sparkling and Trademark Coke grow by 9% and 8% respectively in the quarter. The juice category also continued to grow. Nigeria remains a key growth driver for the Group, although the recent significant decline in oil prices and the consequent currency depreciation, coupled with the elections in March and April, may impact macroeconomic trends as the year progresses.

§ Volume in Romania maintained the negative trend and recorded a high single-digit decline in the fourth quarter, following a low single-digit decline in the prior-year period. As a result, in the full year Romania volumes declined by mid single digits. In what remains a highly competitive environment, Sparkling declined by 7%, as higher volume in Sprite and Coca-Cola Zero did not fully offset the negative performance of Brand Coca-Cola. Juice continued its solid growth and delivered a high single-digit increase, driven by Cappy Pulpy. Package mix improved for yet another quarter driven by low single-digit growth in the single serve packages in both water and sparkling.

§ Ukraine delivered mid single-digit volume growth in the fourth quarter, following a high single-digit decline in the prior-year quarter. This resulted in a 4% decline in the full year, following a low double-digit decline in the prior year. The overall environment remains very difficult, severely impacting consumer demand and in some cases product distribution. Against this backdrop, we have intensified our promotional activities, while adjusting our route-to-market and consistently focusing on strong execution, leading to 3% growth in Sparkling beverages in the fourth quarter. Overall, we gained volume and value share in Sparkling beverages.

§ Our Emerging markets segment posted a €17.3 million deterioration in comparable EBIT in the fourth quarter to €37.1 million. In the fourth quarter, price/mix improvements, higher volume and lower input costs were more than offset by the significant negative currency impact, higher concentrate costs and operating expenses.  As a result, in the full year, comparable operating profit reached €220.1 million. This was €42.6 million below the prior year, as the benefits from positive price/mix and favourable input costs were more than offset by the negative impact of foreign exchange movements, higher concentrate costs and operating expenses.

 

Business Outlook

 

The volatile environment seen in 2014 has continued into 2015, creating varying dynamics in the business. We are encouraged by the macroeconomic outlook in our Established and Developing markets, which are expected to benefit to some degree from quantitative easing in the Eurozone and the lower oil price. We expect volumes to stabilise in these markets, supporting operational leverage and enhancing country mix. In the Emerging markets, Russia and Ukraine are expected to continue to face continued difficult trading conditions, whereas our business in Nigeria has all the right ingredients for further growth.

The initiatives we put in place in 2014 to improve revenue ahead of volume delivered the expected positive results. We will continue to utilise similar OBPPC initiatives to achieve higher FX-neutral net sales revenue per case through better mix. We also plan on taking additional pricing in markets impacted by foreign currency depreciation. The pricing we took in 2014 to compensate for the increased concentrate cost will not need to be repeated this year. 

The magnitude of the currency headwinds that the business may face in the year are difficult to quantify due to continued volatility in a number of our Emerging markets. Therefore, our plans for the year are also focused on the factors that can mitigate the potential impact of currency movements. These factors can be grouped under three areas. Firstly, we are prepared to take price increases to offset currency depreciation and accompanying inflation in the relevant countries. Secondly, in the light of lower sugar and PET resin costs, we expect to achieve a high single-digit percentage decrease in full-year currency-neutral input cost per case year on year. It is important to note that raw material costs are expected to partially offset incremental currency headwinds due to the correlation between currencies, oil prices and PET resin costs. Where necessary we will deploy self-help measures to ensure that the operating costs are in line with the realities of the business. Finally, the operational leverage from the expected recovery in volumes from -2.8% seen in 2014 and positive country mix should help alleviate the impact of currencies.

Operating expense management will continue to be a key element of our plans for the year. Further action in 2015 should support our EBIT margin, assuming that volumes progress as expected in the year.

We manage our business for the long term. We are confident that we have the right strategy in place to grow in a sustainable and profitable way. Our product portfolio contains some of the world's best known and loved brands and we operate across 28 countries, largely characterised by low per capita consumption of our products, giving us excellent growth opportunities.

Technical guidance

We continue to implement initiatives that further improve operational efficiencies, including SAP Wave 2 exploitation, expansion of the scope of our shared services centre, route-to-market optimisation and other restructuring initiatives. For 2015, we have identified restructuring initiatives of approximately €45 million. We expect these initiatives to yield €30 million in annualised benefits from 2016 onwards, while the initiatives already taken in 2014 and those that we will take in 2015 are expected to yield €44 million of total benefits in 2015.

Considering the dynamics of the evolving mix of profitability in our country portfolio, we continue to expect our comparable effective tax rate to range between 24% and 26%.

The emphasis on free cash flow generation and tight working capital management delivered good results in 2014, and we believe we can make further progress in 2015 on both fronts. However, due to the adverse impact of currency depreciation on cash in 2014 and 2015, we are changing our target for free cash flow to €1.1-1.2 billion during the three-year period between 1 January 2013 and 31 December 2015.

Annual capital expenditure over the medium term is still expected to range between 5.5% and 6.5% of net sales revenue, reflecting our commitment to invest in the long-term development of our business.

Following the recent guidance from the Financial Reporting Council and Coca-Cola HBC's de-listing from the New York Stock Exchange and de-registration from the Securities and Exchange Commission, we have taken the decision to discontinue our practice of quarterly reporting. In line with UK practice, we will adopt half-year and full-year reports, and Q1 and Q3 trading updates effective from Q1 2015.

 

Group Financial Review
Selected income statement and other items	Fourth Quarter
	2014 € million	2013  € million	%      Change
Volume (m unit cases)	485.1	481.1	0.8%
Net sales revenue	1,510.0	1,574.6	-4.1%
Net Sales Revenue per Unit Case (€)	3.11	3.27	-4.9%
Currency Neutral Net Sales Revenue per Unit Case (€)	3.11	3.05	2.0%
Cost of goods sold	(1,007.0)	(1,040.3)	-3.2%
Comparable cost of goods sold1	(992.0)	(1,037.3)	-4.4%
Gross profit	503.0	534.3	-5.9%
Comparable gross profit1	518.0	537.3	-3.6%
Operating expenses	(461.1)	(469.0)	-1.7%
Comparable operating expenses1	(461.1)	(469.0)	-1.7%
Operating profit (EBIT)	17.2	34.1	-49.6%
Comparable operating profit (EBIT)1	56.9	68.3	-16.7%
Adjusted EBITDA2	129.4	132.4	-2.3%
Comparable adjusted EBITDA1	148.8	158.3	-6.0%
Total net finance costs	(18.4)	(23.5)	-21.7%
Comparable total net finance costs1	(18.4)	(23.5)	-21.7%
Tax	14.5	(2.7)	n/a
Profit after tax attributable to owners of the parent	66.5	8.4	>100%
Comparable profit after tax attributable to owners of the parent1	30.4	34.3	-11.4%
Basic earnings per share (€)	0.182	0.023	>100%
Comparable basic earnings per share (€)1	0.083	0.094	-11.7%
Net cash from operating activities2	113.7	182.4	-37.7%
Capital expenditure2	(125.7)	(114.8)	9.5%
Free cash flow2	(12.0)	67.6	n/a

 

Selected income statement and other items	Full Year
	2014 € million	2013  € million	%      Change
Volume (m unit cases)	2,002.9	2,060.5	-2.8%
Net sales revenue	6,510.2	6,874.0	-5.3%
Net Sales Revenue per Unit Case (€)	3.25	3.34	-2.7%
Currency Neutral Net Sales Revenue per Unit Case (€)	3.25	3.17	2.5%
Cost of goods sold	(4,192.5)	(4,438.5)	-5.5%
Comparable cost of goods sold1	(4,184.1)	(4,433.0)	-5.6%
Gross profit	2,317.7	2,435.5	-4.8%
Comparable gross profit1	2,326.1	2,441.0	-4.7%
Operating expenses	(1,901.4)	(2,006.3)	-5.2%
Comparable operating expenses1	(1,901.4)	(1,987.1)	-4.3%
Operating profit (EBIT)	361.1	373.7	-3.4%
Comparable operating profit (EBIT)1	424.7	453.9	-6.4%
Adjusted EBITDA2	742.1	756.1	-1.9%
Comparable adjusted EBITDA1	784.7	822.6	-4.6%
Total net finance costs	(72.9)	(91.5)	-20.3%
Comparable total net finance costs1	(72.9)	(83.4)	-12.6%
Tax	(57.8)	(72.9)	-20.7%
Profit after tax attributable to owners of the parent	294.8	221.2	33.3%
Comparable profit after tax attributable to owners of the parent1	277.4	293.1	-5.4%
Basic earnings per share (€)	0.809	0.608	33.1%
Comparable basic earnings per share (€)1	0.761	0.806	-5.6%
Net cash from operating activities2	686.3	784.9	-12.6%
Capital expenditure2	(353.6)	(372.2)	-5.0%
Free cash flow2	332.7	412.7	-19.4%

¹   Refer to the 'Reconciliation of Reported to Comparable Financial Indicators' section.

²    Refer to 'Supplementary Information' section.

 

 

Net sales revenue

Net sales revenue per unit case decreased by 5% during the fourth quarter and by 3% during the full year of 2014, compared to the respective prior year periods, on a reported basis. On a currency neutral basis, net sales revenue per unit case increased by 2% during the fourth quarter and by 3% in the full year of 2014 compared to the respective prior year periods.

 

Cost of goods sold

Comparable cost of goods sold decreased by 4% in the fourth quarter and by 6% for the full year of 2014, compared to the respective prior year periods, as the input cost environment continued to be favourable.

 

Gross profit

Comparable gross profit margin increased slightly from 34.1% in the fourth quarter of 2013 to 34.3% in the fourth quarter of 2014 and from 35.5% in 2013 to 35.7% in the full year of 2014.

 

Operating expenses

Comparable operating expenses decreased by 2% during the fourth quarter and by 4% during the full year of 2014 versus the respective prior year periods, mainly reflecting the benefits of our restructuring initiatives.  For the full year of 2014, the decrease is more evident in the warehousing and distribution areas as well as in the marketing expenses.

 

Operating profit

Comparable operating profit decreased by 17% in the fourth quarter of 2014 as the benefits from our revenue growth initiatives, the favourable input costs and the positive volume impact were not enough to offset the higher foreign currency impact and concentrate costs. For the full year of 2014, comparable operating profit decreased by 6% as the benefit from our revenue growth initiatives and the favourable input costs were more than offset by the negative impact of the volume shortfall, the higher concentrate costs and the significant adverse foreign currency movements.

 

Total net finance costs

Comparable total net finance costs decreased by €5.1 million during the fourth quarter and by €10.5 million during the full year of 2014, compared to the respective prior year periods.

 

 

Tax

On a comparable basis, Coca-Cola HBC's effective tax rate was approximately 23% for both 2014 and 2013. The Group's effective tax rate varies quarterly depending on the mix of taxable profits by territory, the non-deductibility of certain expenses, non-taxable income and other one-off tax items across its territories.

 

Profit after tax attributable to owners of the parent

On a comparable basis, profit after tax attributable to owners of the parent decreased by 11% for the fourth quarter of 2014 and 5% during the full year of 2014 compared to the respective prior year period,  mainly driven by lower operating profitability.

 

Net cash from operating activities

Net cash from operating activities decreased by 38% in the fourth quarter of 2014 compared to the respective prior year period, mainly reflecting the decreased operating profitability and the lower pace of improvement in working capital compared to the respective prior year. For the full year of 2014, net cash flow from operating activities decreased by 13% compared to the respective prior year, mainly on the back of the lower pace of improvement in working capital compared to the respective prior year. For the full year of 2014, cash flow from operating activities net of capital expenditure decreased by 19% versus the previous year, mainly on the back of the decreased cash from operating activities which was partially counterbalanced by decreased capital expenditure.

 

Capital expenditure

Capital expenditure, net of receipts from the disposal of assets and including principal repayments of finance lease obligations, increased by 9% in the fourth quarter of 2014 and decreased by 5% in the full year, compared with the respective prior year periods. In the full year of 2014, capital expenditure amounted to €353.6 million of which 51% was related to investment in production equipment and facilities and 25% to the acquisition of marketing equipment. In 2013, capital expenditure amounted to €372.2 million of which 48% was related to investment in production equipment and facilities and 20% to the acquisition of marketing equipment.

 

Supplementary Information
The financial measures Adjusted EBITDA, Capital Expenditure and Free Cash Flow consist of the following reported amounts in the condensed consolidated financial statements:
	Fourth quarter
	2014 € million	2013 € million
Profit after tax	66.0	8.4
Tax (credited) / charged to the income statement	(14.5)	2.7
Total finance costs, net	18.4	23.5
Share of results of equity method investments	(52.7)	(0.5)
Operating profit (EBIT)	17.2	34.1
Depreciation and impairment of property, plant and equipment	110.2	96.0
Amortisation of intangible assets	0.1	0.1
Employee share options	2.7	2.2
Other non-cash items	(0.8)	-
Adjusted EBITDA1	129.4	132.4
Losses / (gains) on disposal of non-current assets	0.2	(9.3)
Decrease in working capital	7.1	75.7
Tax paid	(23.0)	(16.4)
Net cash from operating activities	113.7	182.4
Payments for purchases of property, plant and equipment	(136.3)	(127.1)
Principal repayments of finance lease obligations	(4.4)	(3.8)
Proceeds from sale of property, plant and equipment	15.0	16.1
Capital expenditure	(125.7)	(114.8)
Net cash from operating activities	113.7	182.4
Capital expenditure	(125.7)	(114.8)
Free cash flow	(12.0)	67.6
	Full Year
	2014 € million		2013 € million
Profit after tax	294.2		221.2
Tax charged to the income statement	57.8		72.9
Total finance costs, net	72.9		91.5
Share of results of equity method investments	(63.8)		(11.9)
Operating profit (EBIT)	361.1		373.7
Depreciation and impairment of property, plant and equipment	368.8		375.1
Amortisation of intangible assets	0.4		1.0
Employee share options	12.1		6.3
Other non-cash items	(0.3)		-
Adjusted EBITDA1	742.1		756.1
Gains on disposal of non-current assets	(1.8)		(13.6)
Decrease in working capital	15.0		98.5
Tax paid	(69.0)		(56.1)
Net cash from operating activities	686.3		784.9
Payments for purchases of property, plant and equipment	(362.6)		(380.2)
Principal repayments of finance lease obligations	(14.0)		(16.5)
Proceeds from sale of property, plant and equipment	23.0		24.5
Capital expenditure	(353.6)		(372.2)
Net cash from operating activities	686.3		784.9
Capital expenditure	(353.6)		(372.2)
Free cash flow	332.7		412.7

 

¹ Adjusted EBITDA refers to operating profit before deductions for depreciation and impairment of property, plant and equipment (included both in cost of goods sold and in operating expenses), amortisation and impairment of intangible assets, employee share options and other non-cash items, if any.

 

The volume, net sales revenue and net sales revenues per unit case on a reported and currency neutral base, are provided for NARTD and premium spirits, as set out below:

 

	Q4				%			Full Year				%
NARTD	2014	2013			change			2014		2013		change
Volume (m unit cases) (1)	484.1	480.3			0.8%			2,000.3		2,058.6		-2.8%
Net Sales Revenues (€ m)	1,435.8	1,497.1			-4.1%			6,311.3		6,692.1		-5.7%
Net Sales Revenue per Unit Case (€)	2.97	3.12			-4.8%			3.16		3.25		-2.8%
Currency Neutral Net Sales Revenue per Unit Case (€)	2.97	2.93			1.4%			3.16		3.10		1.9%
	Q4					%		Full Year				%
Premium Spirits	2014	2013			change			2014		2013		change
Volume (m unit cases)(1)	0.985	0.820			20.1%			2.553		1.946		31.1%
Net Sales Revenues (€ m)	74.2	77.5			-4.3%			198.9		181.9		9.4%
Net Sales Revenue per Unit Case (€)	75.30	94.55			-20.4%			77.91		93.49		-16.7%
Currency Neutral Net Sales Revenue per Unit Case (€)	75.30	74.21			1.5%			77.91		81.77		-4.7%
	Q4						%	Full Year				%
Total	2014		2013			change		2014		2013		change
Volume (m unit cases) (1)	485.1		481.1			0.8%		2,002.9		2,060.5		-2.8%
Net Sales Revenues (€ m)	1,510.0		1,574.6			-4.1%		6,510.2		6,874.0		-5.3%
Net Sales Revenue per Unit Case (€)	3.11		3.27			-4.9%		3.25		3.34		-2.7%
Currency Neutral Net Sales Revenue per Unit Case (€)	3.11		3.05			2.0%		3.25		3.17		2.5%

 

 ⁽¹⁾ For NARTD volume, one unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. For premium spirits volume, one unit case also corresponds to 5.678 litres.

 

Coca-Cola HBC Group

 

Coca-Cola HBC is the second-largest bottler of the brands of The Coca-Cola Company in terms of volume with sales of more than 2 billion unit cases. It has a broad geographic footprint with operations in 28 countries serving a population of approximately 585 million people. Coca-Cola HBC offers a diverse range of non-alcoholic ready to drink beverages in the sparkling, juice, water, sport, energy, tea and coffee categories. Coca-Cola HBC is committed to promoting sustainable development in order to create value for its business and for society. This includes providing products that meet the beverage needs of consumers, fostering an open and inclusive work environment, conducting its business in ways that protect and preserve the environment and contribute to the socio-economic development of the local communities.

 

Coca-Cola HBC has a premium listing on the London Stock Exchange (LSE: CCH) and its shares are listed on the Athens Exchange (ATHEX: EEE). Coca-Cola HBC is included in the Dow Jones Sustainability and FTSE4Good Indexes. For more information, please visit http://www.coca-colahellenic.com. 

 

 

 

 

Conference call

 

Coca-Cola HBC will host a conference call for financial analysts and investors to discuss the fourth quarter and 2014 financial results on 18 February 2015 at 10:30 am, Swiss time (9:30 am London, 11:30 am Athens, and 4:30 am New York time). Interested parties can access the live, audio webcast of the call through
Coca-Cola HBC's website (www.coca-colahellenic.com/investorrelations/webcasts).

 

Enquiries

Coca‑Cola HBC AG Basak Kotler Investor Relations Director	Tel: +41 41 726 0143 email: basak[email protected]
Eri Tziveli Investor Relations Manager	Tel: +30 210 618 3133 email: [email protected]
Nikos Efstathopoulos Investor Relations Manager	Tel: +30 210 618 3124 email: nikos.efstathopoulos@cchellenic.com

 

International media contact:   StockWell Communications Rob Morgan Ben Ullmann Anushka Mathew	Tel: +44 20 7240 2486 [email protected] [email protected] [email protected]
Greek media contact:   V+O Communications Argyro Oikonomou	Tel: +30 211 7501219 email: [email protected]