Third Quarter In-Line with Guidance,
Full-Year Outlook Affirmed
Coca-Cola European Partners plc (CCEP) (ticker symbol: CCE)
today announces its interim results for the third-quarter ended 29
September 2017 and affirms full-year 2017 outlook.
Highlights
- Third-quarter diluted earnings per
share were €0.62 on a reported basis or €0.68 on a comparable
basis, including a negative currency translation impact of
€0.01.
- Third-quarter reported revenue
totalled €3.0 billion, down 1.5 percent, or down 0.5 percent on a
comparable and fx-neutral basis. Volume was down 3.5 percent on a
comparable basis.
- Third-quarter reported operating
profit was €427 million; comparable operating profit was €470
million, up 2.5 percent on a comparable basis, or up 3.5 percent on
a comparable and fx-neutral basis.
- CCEP provides full-year guidance for
2017 including comparable diluted earnings per share in a range of
€2.10 to €2.13 including currency translation at recent
rates.
- CCEP remains on track to achieve
pre-tax savings of €315 million to €340 million through synergies
by mid-2019.
- CCEP declares quarterly dividend of
€0.21 per share.
“Our third-quarter results were in-line with our guidance and we
remain firmly on track to achieve our planned synergies and
continue to make solid progress in building on our foundation of
winning with customers through great beverages, great service, and
great people,” said Damian Gammell, Chief Executive Officer.
“We remain focused on driving profitable revenue growth,
expanding our portfolio, and continuing to invest in our business
to capture the long-term growth opportunities ahead of us,” Mr.
Gammell said. “This includes improving our sales force
capabilities, evolving our routes-to-market, reducing low value
promotions, and leveraging our digital abilities. These factors,
combined with our focus on cash generation, will help us address
the headwinds that lie ahead and importantly, support our most
important goal which is driving shareholder value.”
Key Financial MeasuresUnaudited, fx
impact calculated byrecasting current year results at prioryear
rates
Third Quarter Ended 29 September 2017 € million
% change
AsReported
Comparable Fx-Impact
AsReported
Comparable Fx-Impact
ComparableFx-Neutral
Revenue 2,964 2,964 (29 ) (1.5 )%
(1.5 )% (1.0 )% (0.5 )%
Cost of sales 1,774 1,768 (17 ) (1.0 )% (1.5 )% (1.0 )% (0.5 )%
Operating expenses 763 726 (7 ) (5.5 )% (3.5 )% (0.5 )% (3.0 )%
Operating profit 427 470 (5 ) 5.5 % 2.5 % (1.0 )% 3.5 % Profit
after taxes 304 333 (4 ) (7.0 )% 3.5 % (1.5 )% 5.0 % Diluted
earnings per share (€) 0.62 0.68
(0.01 ) (7.5 )% 3.0 %
(1.0 )% 4.0 %
Key Financial MeasuresUnaudited, fx
impact calculated byrecasting current year results at prioryear
rates
Nine Months Ended 29 September 2017 € million %
change
AsReported
Comparable Fx-Impact
AsReported
Comparable Fx-Impact
ComparableFx-Neutral
Revenue 8,400 8,400 (122 ) 28.0 % 1.5 % (1.5 )% 3.0 % Cost of sales
5,095 5,092 (73 ) 26.5 % 1.5 % (1.5 )% 3.0 % Operating expenses
2,243 2,150 (25 ) 24.0 % (2.5 )% (1.0 )% (1.5 )% Operating profit
1,062 1,158 (24 ) 47.5 % 9.0 % (2.5 )% 11.5 % Profit after taxes
749 811 (18 ) 39.5 % 11.5 % (2.5 )% 14.0 % Diluted earnings per
share (€) 1.53 1.66 (0.04
) 14.0 % 11.5 % (2.5 )%
14.0 %
Operational Review
Third-quarter 2017 diluted earnings per share were €0.62 on a
reported basis, or €0.68 on a comparable basis. Currency
translation had a negative impact of €0.01 on third-quarter
comparable diluted earnings per share. Third-quarter reported
operating profit totalled €427 million, up 5.5 percent versus prior
year. Comparable operating profit was €470 million, up 2.5 percent
on a comparable basis, or up 3.5 percent on a comparable and
fx-neutral basis.
Nine-months ended 2017 diluted earnings per share were €1.53 on
a reported basis, or €1.66 on a comparable basis. Currency
translation had a negative impact of €0.04 on comparable diluted
earnings per share for the nine-months ended 2017. Nine-months
ended 2017 reported operating profit totalled €1.1 billion, up 47.5
percent versus prior year. Comparable operating profit was €1.2
billion, up 9.0 percent on a comparable basis, or up 11.5 percent
on a comparable and fx-neutral basis.
Key operating factors in the third quarter include a modest
revenue decline driven by unfavourable weather as well as strong
prior year comparables. Additional factors include a stable
gross margin as the growth in revenue per unit case offset the
increase in cost of sales per unit case, reflecting an ongoing
focus on improving mix and promotional
profitability. Operating margins improved as we continue to
benefit from post-merger synergy benefits.
Revenue
Third-quarter 2017 reported revenue totalled €3.0 billion, down
1.5 percent, or down 0.5 percent on a comparable and fx-neutral
basis. Revenue per unit case was up 3.0 percent on a comparable and
fx-neutral basis driven by favourable price, promotion, and package
mix. Third-quarter volume decreased 3.5 percent on a
comparable basis, reflecting strong prior year hurdles,
unfavourable weather conditions, and the impact from customer
disruptions as we focus on maintaining gross margins.
On a territory basis for the third quarter, Iberia revenues were
up 0.5 percent, as revenue per unit case growth offset a decline in
volume, supported by favourable channel and package mix. Revenue in
Germany was down 1.0 percent, with a decline in volume partially
offset by strong revenue per unit case growth driven by the impact
of pricing and promotional plans as well as favourable package and
brand mix. Great Britain had strong revenue growth on an
fx-neutral basis with gains in both revenue per unit case and
volume, driven by solid growth in Coca-Cola Zero Sugar, flavours,
and energy. On a reported basis, Great Britain revenues were down
3.0 percent, driven by a decline of the British pound versus the
Euro of approximately 5.0 percent. Revenue in France was down 6.5
percent, as revenue per unit case growth was not enough to offset a
decline in volume, driven by unfavourable weather and lower
promotional activity versus prior year. Revenue in the Northern
European territories (Belgium, Luxembourg, the Netherlands, Norway,
Sweden, and Iceland) was flat, benefiting 2.0 percent from the
inclusion of Iceland and a 2.0 percent decline in previously
existing territories. Growth in Northern Europe was led by Norway
and Sweden, offset by a decline in Belgium/Luxembourg.
On a brand basis for the third quarter, volume for sparkling
brands was down 3.0 percent. Coca-Cola trademark brands decreased
4.5 percent, with growth of 8.0 percent in Coca-Cola Zero Sugar
offset by declines in other trademark brands. Sparkling flavours
and energy grew 1.5 percent led by energy brands and Fanta. Still
brands decreased 5.5 percent. Water brands were down 8.5 percent,
impacted by the discontinuation of select less profitable water
brands partially offset by solid growth from Aquabona in the
quarter. Juices, isotonics, and other were down 3.5 percent with
growth from Capri-Sun offset by a decline in the sports category
reflecting unfavourable weather and strong prior year hurdles,
notably in Iberia.
Cost of Sales
Third-quarter 2017 reported cost of sales were €1.8 billion,
down 1.0 percent. Comparable cost of sales were €1.8 billion, down
1.5 percent on a comparable basis, or down 0.5 percent on a
comparable and fx-neutral basis. Third-quarter cost of sales per
unit case increased 2.5 percent on a comparable and fx-neutral
basis, driven by channel and brand mix, manufacturing costs, as
well as year-over-year cost increases in key inputs, principally
concentrate, partially offset by benefits from our synergy
programmes.
Operating Expenses
Third-quarter 2017 reported operating expenses were €763
million, down 5.5 percent. Comparable operating expenses were €726
million, down 3.5 percent on a comparable basis, or down 3.0
percent on a comparable and fx-neutral basis. This reflects
synergy benefits, expense timing, volume, and a continued focus on
managing operating expenses.
Outlook
For 2017, as previously stated, CCEP expects low single-digit
revenue growth and operating profit growth at the top end of the
high single-digit range. Excluding synergies, operating profit
growth has been broadly in-line with revenue growth for the first
nine months of 2017. For the full year, we now expect some
deleveraging as we invest in our business while maintaining our
full-year operating profit guidance. Each of these growth figures
is on a comparable and fx-neutral basis when compared to 2016
comparable results. CCEP also expects diluted earnings per share in
the range of €2.10 to €2.13 including currency translation at
recent rates. At recent rates, currency translation reduces 2017
full-year diluted earnings per share by approximately 2
percent.
CCEP now expects 2017 free cash flow* in the range of €850
million to €900 million, including the expected benefit from
improved working capital offset by the impact of restructuring and
integration costs. Capital expenditures are expected to be
approximately €550 million, including approximately €50 million to
€75 million of capital expenditures related to synergies.
Weighted-average cost of debt is expected to be approximately 2.0
percent. The comparable effective tax rate for 2017 is expected to
be just under 25 percent. CCEP does not expect to repurchase shares
in 2017.
CCEP remains on track to achieve pre-tax run-rate savings of
€315 million to €340 million through synergies by mid-2019.
Further, CCEP expects to exit 2017 with run-rate savings of
approximately one-half of the target. Restructuring cash costs to
achieve these synergies are expected to be approximately 2 1/4
times expected savings and includes cash costs associated with
pre-transaction close accruals. Given these factors, currency
exchange rates, and our outlook for 2017, CCEP expects year-end net
debt to adjusted EBITDA* for 2017 to be under 3 times.
* Refer to ‘Note Regarding the Presentation of Alternative
Performance Measures’ for further details about these measures.
Dividends
The CCEP Board of Directors declared a regular quarterly
dividend of €0.21 per share. The dividend is payable 4 December
2017 to those shareholders of record on 20 November 2017. The
Company is pursuing arrangements to pay the dividend in euros to
shares held within Euroclear Netherlands. Other publicly held
shares will be converted into an equivalent US dollar amount using
exchange rates issued by WM/Reuters taken at 16:00 GMT on 7
November 2017. This translated amount will be posted on our
website, www.ccep.com, under the Investor/Shareowner Information
section.
Conference Call
CCEP will host a conference call with investors and analysts
today at 15:00 GMT, 16:00 CET and 10:00 a.m. EST. The call can be
accessed through the Company’s website at www.ccep.com.
Financial Details
Financial details can be found in our third-quarter 2017 filing,
available at www.morningstar.co.uk/uk/NSM (located under effective
date 29 September 2017) and available immediately on our website,
www.ccep.com, under the Investors tab.
About CCEP
Coca-Cola European Partners plc (CCEP) is a leading consumer
goods company in Western Europe, selling, making and distributing
an extensive range of nonalcoholic ready-to-drink beverages and is
the world’s largest independent Coca-Cola bottler based on revenue.
Coca-Cola European Partners serves a consumer population of over
300 million across Western Europe, including Andorra, Belgium,
continental France, Germany, Great Britain, Iceland, Luxembourg,
Monaco, the Netherlands, Norway, Portugal, Spain and Sweden. The
Company is listed on Euronext Amsterdam, the New York Stock
Exchange, Euronext London and on the Spanish stock exchanges, and
trades under the symbol CCE. For more information about CCEP,
please visit our website at www.ccep.com and follow CCEP on Twitter
at @CocaColaEP.
Forward-Looking Statements
This document may contain statements, estimates or projections
that constitute “forward-looking statements” concerning the
financial condition, performance, results, strategy and objectives
of Coca-Cola European Partners plc and its subsidiaries (“CCEP”).
Generally, the words “believe,” “expect,” “intend,” “estimate,”
“anticipate,” “project,” “plan,” “seek,” “may,” “could,” “would,”
“should,” “might,” “will,” “forecast,” “outlook,” “guidance,”
“possible,” “potential,” “predict” and similar expressions identify
forward-looking statements, which generally are not historical in
nature. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from CCEP’s historical experience and its present expectations or
projections. These risks and uncertainties include, but are not
limited to, obesity concerns; water scarcity and poor quality;
evolving consumer preferences; increased competition and
capabilities in the marketplace; product safety and quality
concerns; perceived negative health consequences of certain
ingredients, such as non-nutritive sweeteners and
biotechnology-derived substances, and of other substances present
in CCEP’s beverage products or packaging materials; increased
demand for food products and decreased agricultural productivity;
changes in the retail landscape or the loss of key retail or
foodservice customers; fluctuations in foreign currency exchange
rates; fluctuations in the stability of the Euro; interest rate
increases; an inability of CCEP to maintain good relationships with
its partners; a deterioration in its partners’ financial condition;
increases in income tax rates, changes in income tax laws or
unfavourable resolution of tax matters; increased or new indirect
taxes in CCEP’s tax jurisdictions; increased cost, disruption of
supply or shortage of energy or fuels; increased cost, disruption
of supply or shortage of ingredients, other raw materials or
packaging materials; changes in laws and regulations relating to
beverage containers and packaging; significant additional labelling
or warning requirements or limitations on the availability of
CCEP’s respective products; an inability of CCEP to protect its
respective information systems against service interruption,
misappropriation of data or breaches of security; unfavourable
general economic or political conditions in Europe or elsewhere;
the United Kingdom’s exit from the European Union; litigation or
legal proceedings; non-compliance with anti-corruption laws and
regulations and economic sanctions programmes; adverse weather
conditions; climate change; damage to CCEP’s respective brand
images and corporate reputation from negative publicity, even if
unwarranted, related to product safety or quality, human and
workplace rights, obesity or other issues; changes in, or failure
to comply with, the laws and regulations applicable to CCEP’s
respective products or business operations; changes in accounting
standards; an inability of CCEP to achieve its respective overall
long-term growth objectives; deterioration of global credit market
conditions; default by or failure of one or more of CCEP’s
respective counterparty financial institutions; fluctuations in
CCEP’s debt rating; an inability to timely implement any previously
announced actions to reinvigorate growth, or to realise the
economic benefits CCEP anticipates from these actions; failure to
realise a significant portion of the anticipated benefits of
strategic relationships, including (without limitation) The
Coca-Cola Company’s relationship with Monster Beverage Corporation;
an inability to renew collective bargaining agreements on
satisfactory terms, or CCEP or its respective partners experience
strikes, work stoppages or labour unrest; future impairment
charges; an inability to realise business integration and synergy
savings; an inability to successfully manage the possible negative
consequences of productivity initiatives; global or regional
catastrophic events; and other risks discussed in the 2016 Annual
Report on Form 20-F, published on 12 April 2017, and in the interim
results for the first six months ended 30 June 2017, published on
14 August 2017. Due to these risks and uncertainties, CCEP’s actual
future results, dividend payments, and capital and leverage ratios
may differ materially from the plans, goals, expectations and
guidance set out in CCEP’s forward-looking statements. You should
not place undue reliance on forward-looking statements, which speak
only as of the date they are made. CCEP does not undertake any
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise, except as required under applicable rules, laws and
regulations. CCEP assumes no responsibility for the accuracy and
completeness of any forward-looking statements. Any or all of the
forward-looking statements contained in this filing and in any
other of CCEP’s public statements may prove to be incorrect.
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Coca-Cola European Partners plcInvestor Relations:Thor Erickson,
+1 (678) 260-3110orMedia Relations:Shanna Wendt, +44 7976 595
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