TIDMCCH
RNS Number : 5891N
Coca-Cola HBC AG
10 August 2017
EXCELLENT FIRST HALF RESULTS
Coca-Cola HBC AG, a leading bottler of The Coca-Cola Company,
reports its financial results for the six months ended 30 June
2017.
Half-year highlights
-- Revenue growth accelerated in the second quarter, up 5.7% for
the first half on an FX-neutral basis and 5.6% on a reported
basis
-- Focus on value delivery through a combination of category and
package mix improvements as well as price increases resulted in
revenue per case growth by 4.3% on an FX-neutral basis with all
market segments improving
-- Volume grew by 1.4% in the first half, with growth in all segments
- Volume in the Established markets increased by 0.8%, with a
good second quarter supported by the late Easter and a warm
June
- Good growth in most of the markets in the Developing segment
led to 0.8% volume growth
- The Emerging markets segment delivered 1.9% volume growth in
the first half with good performances in Ukraine, Romania and
Serbia
-- Operating leverage resulted in a 40 basis point reduction in
comparable operating expenses as percentage of net sales
revenue
-- Comparable operating margin increased by 150 basis points to
9.1%, benefiting from operating leverage despite adverse input
costs and foreign exchange movements
-- Comparable earnings per share was EUR0.576 - a 38.5% increase
on the prior-year period; basic earnings per share was EUR0.526 - a
35.9% increase on the prior-year period
Half-Year Change
2017 2016
Volume (m unit cases) 1,020.9 1,007.3 1.4%
Net sales revenue (EUR m) 3,213.4 3,043.9 5.6%
Net sales revenue per unit
case (EUR) 3.15 3.02 4.2%
FX-neutral net sales revenue(1)
(EUR m) 3,213.4 3,039.8 5.7%
FX-neutral net sales revenue
per unit case(1) (EUR) 3.15 3.02 4.3%
Operating expenses (EUR m) (933.5) (918.1) 1.7%
Comparable operating expenses(1)
(EUR m) (920.3) (885.1) 4.0%
Operating profit (EBIT)(2)
(EUR m) 266.4 220.6 20.8%
Comparable EBIT(1) (EUR m) 291.1 229.6 26.8%
EBIT margin (%) 8.3 7.2 100bps
Comparable EBIT margin(1)
(%) 9.1 7.5 150bps
Net profit(3) (EUR m) 191.6 140.0 36.9%
Comparable net profit(1,3)
(EUR m) 209.6 150.4 39.4%
Basic earnings per share
(EPS) (EUR) 0.526 0.387 35.9%
Comparable EPS(1) (EUR) 0.576 0.416 38.5%
---------------------------------- -------- -------- -------
(1) For details on APMs refer to 'Alternative Performance
Measures' and 'Definitions and reconciliations of APMs'
sections.
(2) Refer to the condensed consolidated income statement.
(3) Net Profit and comparable net profit refer to net profit and
comparable net profit respectively after tax attributable to owners
of the parent.
Dimitris Lois, Chief Executive Officer of Coca-Cola HBC AG,
commented:
"We are delighted to report an excellent set of results for the
first half of the year, with volume and revenue per case growth in
all three market segments. It is also very pleasing to see the
revenue growth translating into significant margin expansion. This
demonstrates that our strategy to exploit our lean asset base and
improve profitability through operating leverage is powerful and
delivers well.
"We are on track for broad-based revenue and margin growth for
the full year with the organisation energised by the progress we
are making towards our 2020 financial targets."
Coca-Cola HBC Group
Coca-Cola HBC is a leading bottler of The Coca-Cola Company with
an annual sales volume of more than 2 billion unit cases. It has a
broad geographic footprint with operations in 28 countries serving
a population of approximately 595 million people. Coca-Cola HBC
offers a diverse range of primarily 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 is ranked
beverage industry leader in the Dow Jones Sustainability World and
Europe Indices, and is also included in the FTSE4Good Index.
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). For more information, please visit
http://www.coca-colahellenic.com.
Financial information in this announcement is presented on the
basis of
International Financial Reporting Standards ('IFRS').
Conference call
Coca-Cola HBC will host a conference call for financial analysts
and investors to discuss the 2017 half-year financial results on 10
August 2017 at 10:00 am, Swiss time (9:00 am London, 11:00 am
Athens, and 4:00 am New York time). Interested parties can access
the live, audio webcast of the call through Coca-Cola HBC's
website
(http://coca-colahellenic.com/en/investors/).
Enquiries
Coca--Cola HBC Group
Basak Kotler
Investor Relations Tel: +44 20 37 444 231
Director basak.kotler@cchellenic.com
Vasso Aliferi
Investor Relations Tel: +30 210 6183341
Manager vasso.aliferi@cchellenic.com
International media
contact:
Teneo Tel: +44 20 74 203 145
Rob Morgan robert.morgan@teneobluerubicon.com
Anushka Mathew anushka.mathew@teneobluerubicon.com
Greek media contact:
V+O Communications Tel: +30 211 7501219
Argyro Oikonomou ao@vando.gr
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").
Forward-Looking Statements
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 2017 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. 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 2016 Integrated Annual Report for Coca-Cola HBC AG
and its subsidiaries.
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.
Alternative Performance Measures
The Group uses certain Alternative Performance Measures ("APMs")
in making financial, operating and planning decisions as well as in
evaluating and reporting its performance. These APMs provide
additional insights and understanding to the Group's underlying
operating and financial performance, financial condition and cash
flow. The APMs should be read in conjunction with and do not
replace by any means the directly reconcilable IFRS line items. For
more details on APMs please refer to 'Definitions and
reconciliations of APMs' section.
Group Operational Review
We are very pleased with the growth we have seen in the first
half of the year in all three segments. Volume growth accelerated
in the second quarter, in part due to the late Easter, driven by
the Established and Developing market segments.
Net sales revenue improved by 5.7% on an FX-neutral basis, and
5.6% on a reported basis. Category and package mix improvements in
all segments, combined with price increases, delivered 4.3%
FX-neutral net sales revenue per case growth. Despite adverse input
costs and foreign exchange movements, revenue growth drove
significant operating leverage, delivering a 26.8% increase in
operating profit and 150 basis points expansion in operating margin
to 9.1%, all on a comparable basis.
Volume performance by segment
Volume increased in the first half by 1.4%, with growth across
all three segments.
The Established markets segment grew by 0.8%, with a robust
second quarter which benefited from the late Easter and a warm
June. Good performances in Greece and Ireland offset volume decline
in Italy. The Developing segment also grew by 0.8%, helped by
strong delivery in the Czech Republic and Hungary, and a return to
volume growth in Poland in the second quarter. The Emerging segment
continued its positive trend, posting an increase of 1.9% in the
first half, driven mainly by growth in Ukraine, Romania and
Serbia.
Volume performance by category
Our commercial initiatives, Occasion, Brand, Price, Pack,
Channel (OBPPC) choices, selective affordability measures and
campaigns such as Taste the Feeling continue to drive good
growth.
Sparkling beverages increased by 1.8% in the first half,
following a 0.9% increase in the prior-year period. Good
performances in most markets, especially in Ukraine, Romania, the
Czech Republic, Hungary and Ireland, more than offset declines in
Italy and Nigeria. We had a number of successful Coke Zero new
formula and Fanta flavour launches, which supported the growth in
the category. Within the category, Trademark Coca-Cola and Fanta
grew by 2.3% and 1.9%, respectively.
Water grew by 0.7%, following a stable performance in the
prior-year period. Strong performance in Italy and growth in
Nigeria lifted the category, while Russia and Poland volumes
suffered from cooler weather, and in the case of Poland, the shift
to a smaller package size as part of our revenue growth management
strategy.
Juice declined by 1.8%, an improved performance compared to the
5.0% decline in the prior-year period, helped by a positive
contribution from Russia, the Czech Republic and Hungary. Ireland
was adversely impacted by portfolio changes within the category,
and Nigeria by the significant price increases we have taken.
RTD Tea declined in the first half by 6.4%. While the declines
were driven by Russia and Switzerland, we saw positive results in
Romania, Hungary and Bulgaria.
Energy posted an increase of 17.6% in the first half, continuing
the strong trend we have seen in recent years in this strategically
important growth category. We continue to build Monster volumes,
which grew by 34.6% organically. Including new market launches,
Monster volumes demonstrated 43.2% growth.
Our Premium Spirits business generated revenues of EUR89.3
million. Volume increased by 9.9%, helped by the inclusion of new
brands in our portfolio.
Selling a larger proportion of high-value single-serve packages
continues to be a priority. In the period, single-serve packages
increased by 2.4%, while multi-serves increased by 0.6%, leading to
a 40 basis point mix improvement. Established and Developing market
segments improved their package mix, while the Emerging markets
segment deteriorated by 0.2 percentage points. Sparkling package
mix deteriorated by 0.3 percentage points and Water package mix
improved by 2.2 percentage points in the period.
Key financials
It was a strong period for FX-neutral net sales revenue per
case, which grew by 4.3% as a result of the price increases we have
taken, particularly in Nigeria, and improved package and category
mix. In addition to the much improved FX-neutral net sales revenue
per case in Emerging markets, it is pleasing to see that
Established and Developing markets, where we have seen persistent
deflation in recent years, had a good start to the year with better
FX-neutral net sales revenue per case.
Net sales revenue of EUR3.2 billion was up by 5.7% on an
FX-neutral basis, helped by our revenue growth initiatives,
including pricing, and higher volumes in all segments. The net
impact from currency movements was minimal in the period, and
therefore net sales revenue was up 5.6%.
Input costs per case increased by 2.4% on an FX-neutral basis,
driven mainly by PET resin, which in turn reflected higher
year-on-year oil prices. The adverse impact from foreign currency
movements amounted to EUR23 million in the period.
We continue to drive efficiency measures which, helped by strong
top-line operating leverage, led to a 40 basis point improvement in
comparable operating expenses as a percentage of net sales revenue.
On a segmental basis, Emerging and Established markets showed
improvements, while Developing markets worsened in the period due
to a significant bad debt provision in Croatia. Reductions in
administrative and warehousing costs made the biggest contribution
to savings, while sales and marketing expenses increased as a
percentage of net sales revenue.
Comparable EBIT was EUR291.1 million, up 26.8% compared to the
prior-year period, resulting in a 150 basis point expansion in
comparable EBIT margin to 9.1%. The operating leverage effect of
strong topline growth, mainly from price and mix improvements, was
the key driver. On a segmental basis, we saw differing dynamics.
The Emerging markets benefited from price increases and a smaller
adverse net foreign exchange impact than in recent years, as the
positive correction of the Russian Rouble offset most of the
adverse impact of the Nigerian Naira devaluation. These factors led
to an 82.5% increase in the Emerging segment comparable operating
profit, and 410 basis point improvement in comparable operating
margin to 10.4%. The bad debt provision impact mentioned above held
back profitability in the Developing markets, while Established
markets demonstrated marginally better profitability. On a reported
basis, we delivered EUR266.4 million of EBIT in the period, a 20.8%
improvement on the prior-year period.
We incurred EUR13 million in pre-tax restructuring charges in
the period, the majority of which was due to our actions in the
Established markets segment. Restructuring benefits in the first
half from 2016 and 2017 initiatives amounted to EUR8 million.
Free cash flow was lower than in recent periods at EUR95.1
million, mainly due to the distorting effect of the phasing of
certain working capital items, and will normalise in the full
year.
Comparable net profit benefited from lower financing costs
following our debt refinancing in 2016. Comparable net profit of
EUR209.6 million and comparable basic earnings per share of
EUR0.576 were 39.4% and 38.5% higher than in the prior-year period,
respectively. Reported net profit and reported basic earnings per
share were EUR191.6 million and EUR0.526, respectively, in the
period.
Operational Review by Reporting Segment
Established markets
Half-Year Change
2017 2016
Volume (m unit cases) 299.2 296.9 0.8%
Net sales revenue (EUR
m) 1,202.1 1,192.6 0.8%
Net sales revenue per unit
case (EUR) 4.02 4.02 -
FX-neutral net sales revenue
(EUR m) 1,202.1 1,190.7 1.0%
FX-neutral net sales revenue
per unit case (EUR) 4.02 4.01 0.2%
Operating profit (EBIT)
(EUR m) 99.0 97.5 1.5%
Comparable EBIT (EUR m) 106.7 103.8 2.8%
EBIT margin (%) 8.2 8.2 10bps
Comparable EBIT margin
(%) 8.9 8.7 20bps
-------------------------------- -------- -------- -------
-- Established markets volume increased by 0.8% in the first
half with growth across all countries except for Italy. Water and
Energy were the growth drivers, more than offsetting declines in
Sparkling, Juice and RTD Tea.
-- Net sales revenue increased by 0.8% in the first half. Volume
growth, and favourable price and package mix more than offset the
unfavourable channel mix. FX-neutral net sales revenue per case
increased by 0.2% in the period.
-- Volume in Italy declined by low single digits, with declines
in Sparkling being partially offset by growth in Water despite the
delisting of the low-value water brands. Sparkling declined by mid
single digits with good performances from Sprite and Coke Zero,
following the launch of the new formula in March, and the launch of
Coke Zero Lemon, partially offsetting declines in Coke Regular and
Coke Light. The Water strategy we implemented in 2016 is
delivering, with high single-digit growth in volume and improved
net sales revenue per case. Energy continued to grow well, with a
good performance in Monster.
-- Volume in Greece grew by mid single digits in the first half,
driven by Sparkling, Water and Energy. Sparkling growth was driven
by Coke Zero and the introduction of Coca-Cola with Stevia at the
end of March. Water grew, particularly in the wholesale channel.
Energy continued to grow following the introduction of new flavours
of Monster and increased promotional activity.
-- In Switzerland, volume grew by low single digits driven by
Water, Coke Zero and Fanta, and supported by good weather. Water
grew by mid single digits following increased promotional activity.
Coke Zero continued to grow well, helping to offset declines in
Coke Regular and Coke Light. The relaunch of Fanta, in the new
Slider bottle, also contributed to the overall growth in
Sparkling.
-- Volume in Ireland grew by mid single digits in the first
half, driven by growth in Sparkling, Energy and Water, partially
offset by a decline in Juice. Sparkling was supported by growth in
Coke Zero, following the launch of the new formula, as well as the
launch of the new Fanta Slider bottle. Water grew by mid single
digits, driven by multi-serve packages in the organised trade
channel. Energy continued to grow well.
-- Comparable operating profit in the Established segment
increased by 2.8% to EUR106.7 million in the period, leading to a
20 basis point expansion in comparable operating profit margin to
8.9%. Volume growth, and favourable pricing and package mix more
than offset the negative impact of higher input costs. On a
reported basis, operating profit improved by 1.5% to EUR99.0
million.
Developing markets
Half-Year Change
2017 2016
Volume (m unit cases) 188.6 187.1 0.8%
Net sales revenue (EUR
m) 557.4 526.8 5.8%
Net sales revenue per unit
case (EUR) 2.96 2.82 5.0%
FX-neutral net sales revenue
(EUR m) 557.4 534.7 4.2%
FX-neutral net sales revenue
per unit case (EUR) 2.96 2.86 3.4%
Operating profit (EBIT)
(EUR m) 31.2 39.5 -21.0%
Comparable EBIT (EUR m) 33.3 43.0 -22.6%
EBIT margin (%) 5.6 7.5 -190bps
Comparable EBIT margin
(%) 6.0 8.2 -220bps
-------------------------------- ------ ------ --------
-- Developing markets volume increased by 0.8% in the first
half, with a strong second quarter more than making up for the slow
start to the year. Volume growth was driven by Sparkling, Energy
and Juice, partially offset by a decline in Water.
-- Net sales revenue increased by 5.8% in the first half, with
all components positively contributing. The biggest drivers were
category and package mix, as well as a positive foreign exchange
contribution from the stronger Polish Zloty. On an FX-neutral
basis, net sales revenue per unit case improved by 3.4%.
-- In Poland, volume declined by low single digits. While wet
weather in the second quarter and a weak NARTD market impacted our
volumes negatively, we recovered most of the volume lost in the
first quarter. Sparkling volume grew driven by a strong performance
by Coke Zero and Fanta following the launch of new flavours. Volume
declined in Water following the strategic decision to downsize the
frequency pack from 1.75L to 1.5L, and Energy maintained its robust
performance driven by Monster. Our revenue growth management
initiatives delivered good revenue per case growth in the
period.
-- Volume in Hungary increased by mid single digits in the
period with growth in all categories following good execution of
promotional activities and favourable weather. Sparkling grew by
high single digits driven by Coke Zero new formula as well as
growth in Coke Regular. Fanta and Sprite both grew strongly
following the recent launch of the new Fanta Slider bottle and
Sprite Zero.
-- In the Czech Republic, volume grew by high single digits,
with all categories growing except for Water. Sparkling
demonstrated low-teens growth, driven by Coke Regular, Coke Zero,
Fanta and Sprite. Water declined by high single digits while Energy
continued to grow, increasing volume by mid teens driven by
Monster.
-- Developing markets posted a comparable operating profit of
EUR33.3 million, a 22.6% decrease. Comparable operating profit
margin for the segment recorded a deterioration of 220 basis points
to 6.0%. Improved volume, price and mix only partly offset the
impact of unfavourable input costs and a significant bad debt
provision in Croatia. Reported operating profit declined by 21.0%
to EUR31.2 million.
Emerging markets
Half-Year Change
2017 2016
Volume (m unit cases) 533.1 523.3 1.9%
Net sales revenue (EUR
m) 1,453.9 1,324.5 9.8%
Net sales revenue per unit
case (EUR) 2.73 2.53 7.8%
FX-neutral net sales revenue
(EUR m) 1,453.9 1,314.4 10.6%
FX-neutral net sales revenue
per unit case (EUR) 2.73 2.51 8.6%
Operating profit (EBIT)
(EUR m) 136.2 83.6 62.9%
Comparable EBIT (EUR m) 151.1 82.8 82.5%
EBIT margin (%) 9.4 6.3 310bps
Comparable EBIT margin
(%) 10.4 6.3 410bps
-------------------------------- -------- -------- -------
-- Emerging market segment volume increased by 1.9% with strong
growth in Ukraine, Romania and Serbia. Russia volume declined in
the period.
-- Net sales revenue grew by 9.8%. Benefits from higher volume
and price increases, along with improved category and package mix,
more than offset the unfavourable currency impact, predominantly by
the Nigerian Naira. FX-neutral net sales revenue per case grew by
8.6%, reflecting our strategy to implement improved pricing in our
markets where we face currency headwinds.
-- Volume in Russia declined by low single digits, as we
continue to operate in a challenging market, with declines in total
NARTD market volume. In Sparkling, the low single-digit volume
increase was driven by growth in Trademark Coke, and strong growth
in Sprite, following the successful launch of Sprite Cucumber.
Energy grew by high single digits. Juice volume increased by low
single digits, following a very strong second quarter. Volume loss
was driven by Water and RTD Tea.
-- Nigeria delivered low single-digit volume growth in the first
half of the year despite a difficult second quarter, impacted by
the third round of price increases in April. The sparkling
beverages category was broadly stable, with volume growth in
Trademark Coke and Sprite offsetting losses in Fanta and Schweppes.
In Stills, Juice declined by high teens, although the Pulpy 40cl
PET pack continued its positive performance. Water grew by low
teens, supported by trade incentives and improved availability in
the North. Monster was launched successfully in February and
continues to grow.
-- Volume in Romania grew by mid single digits, maintaining its
positive trend of growth for ten consecutive quarters. Sparkling
beverages posted mid single-digit growth, driven by our strong
marketing plans, the launch of Coca-Cola Lime and the new formula
of Coca-Cola Zero. Water increased by low single digits and Juice
posted a marginal decline, cycling double-digit growth in the
prior-year period. RTD Tea grew by high single digits, helped by
strong promotional activity and the launch of a new flavour.
-- In Ukraine, volume increased by low teens, driven by
Sparkling and RTD Tea. In Sparkling, volume increased by mid teens,
with growth across all brands, supported by the launch of Coca-Cola
Zero and new flavours in Schweppes. RTD Tea sustained the positive
trend of the past few quarters and grew by low teens across all
packs whilst achieving continued market share gains.
-- The Emerging markets segment delivered comparable operating
profit of EUR151.1 million, an increase of 82.5%, leading to 410
basis point improvement in comparable operating margin to 10.4%.
Improved price and mix more than offset the higher input costs and
the adverse net foreign exchange impact, which was smaller in the
period than in recent years. On a reported basis, operating profit
was EUR136.2 million, an increase of 62.9% compared to prior-year
period.
Business Outlook
The excellent progress we have made in the first half of the
year is encouraging. The underlying trends in our markets will be
supported by the robust plans we have for the remainder of the
year. Therefore, we believe that the good volume trends will
continue in the second half, with an acceleration in the Developing
segment.
After a very strong first half of growth in FX-neutral net sales
revenue per case, we expect growth to moderate in the second half
of the year. In the Emerging markets growth will slow due to the
combined effect of most of the 2017 price increases being
front-loaded and the cycling of the price increases we took in the
second half of 2016. The Established markets are expected to follow
a more positive trajectory in the second half, while the Developing
markets will moderate gradually.
During the period, we took advantage of the favourable Russian
Rouble/USD rates and hedged a significant part of our Rouble
exposure. In addition, the significant devaluation of the Nigerian
Naira we expected at the time we gave foreign exchange guidance has
not materialised. As a result of these developments, and taking
into account our hedged positions and current spot rates, we
believe that the net impact from foreign exchange movements on our
P&L in the full year will be neutral. This compares with our
previous guidance of a EUR15m headwind to comparable EBIT.
Input costs have been more benign than expected, with a 2.4%
increase in FX-neutral input cost per case in the first half. As we
progress through the year, we expect input costs to rise as a
result of the higher oil prices and their impact on PET resin as
well as higher aluminium prices. Including the impact of a higher
proportion of finished goods in the portfolio, we now expect
FX-neutral input cost per case to increase by mid single digits in
the full year compared to the high single-digit guidance we gave
previously.
As our revenue grows we are benefiting from having right-sized
our operating cost base over several years. Aided by the operating
leverage of the expected growth in our revenue, we should continue
to deliver reduction in operating expenses as a percentage of net
sales revenue in the year.
We have made another significant step towards achieving our 2020
financial targets in the first six months of the year. Looking
ahead, we continue to expect volume and price/mix growth, as well
as better than expected foreign exchange and input cost movements.
Altogether, these elements lead us to anticipate better revenue and
margin performance in 2017 than we had anticipated at the start of
the year.
Technical guidance
Our initiatives to further improve operational efficiencies
remain largely unchanged. For 2017, we have identified
restructuring initiatives of approximately EUR26 million. We expect
these initiatives to yield EUR14 million in annualised benefits
from 2017 onwards. The initiatives already taken in 2016 and those
that we will take in 2017 are also expected to yield EUR15 million
of total benefits in 2017.
Considering the dynamics of the evolving mix of profitability in
our country portfolio, we expect our comparable effective tax rate
to be in a range between 24% and 26%.
Annual capital expenditure over the medium term is expected to
range between 5.5% and 6.5% of net sales revenue.
Group Financial Review
Income statement Half-Year
-------------------------------------
2016
2017 EUR
EUR million million % Change
------------- ---------- ---------
Volume (m unit cases) 1,020.9 1,007.3 1.4%
Net sales revenue 3,213.4 3,043.9 5.6%
Net sales revenue per unit
case (EUR) 3.15 3.02 4.2%
FX-neutral net sales revenue(1) 3,213.4 3,039.8 5.7%
FX-neutral net sales revenue
per unit case (EUR)(1) 3.15 3.02 4.3%
Cost of goods sold (2,013.5) (1,905.2) 5.7%
Comparable cost of goods sold(1) (2,002.0) (1,929.2) 3.8%
Gross profit 1,199.9 1,138.7 5.4%
Comparable gross profit(1) 1,211.4 1,114.7 8.7%
Operating expenses (933.5) (918.1) 1.7%
Comparable operating expenses(1) (920.3) (885.1) 4.0%
Operating profit (EBIT)(2) 266.4 220.6 20.8%
Comparable operating profit
(EBIT)(1) 291.1 229.6 26.8%
Adjusted EBITDA(1) 423.2 395.7 6.9%
Comparable adjusted EBITDA(1) 448.0 387.1 15.7%
Finance costs, net (17.5) (35.0) -50.0%
Share of results of equity
method investments 5.3 5.3 -
Tax (62.4) (50.7) 23.1%
Comparable tax(1) (69.3) (49.4) 40.3%
Net profit(3) 191.6 140.0 36.9%
Comparable net profit(1,3) 209.6 150.4 39.4%
Basic earnings per share (EUR) 0.526 0.387 35.9%
Comparable basic earnings per
share (EUR)(1) 0.576 0.416 38.5%
------------- ---------- ---------
(1) Refer to the 'Definitions and reconciliations of APMs'
section.
(2) Refer to the condensed consolidated income statement.
(3) Net Profit and comparable net profit refer to net profit and
comparable net profit respectively after tax attributable to owners
of the parent.
On an FX-neutral basis, net sales revenue improved by 5.7%
during the first half of 2017, compared to the prior-year period.
Net sales revenue improved by 5.6% during the first half of 2017,
compared to the prior-year period, driven by category and package
mix improvements in all segments, coupled with price increases, and
higher volumes in all segments.
Comparable cost of goods sold increased by 3.8% and cost of
goods sold increased by 5.7% in the first half of 2017, compared to
the prior-year period, as a result of increased input costs driven
by increases in resin, sugar and aluminium prices in the period, as
well as growing share of high-value finished goods in our
purchases.
Comparable gross profit margin increased from 36.6% in the first
half of 2016 to 37.7% in the first half of 2017, mainly reflecting
the FX-neutral net sales revenue expansion.
Comparable operating expenses increased by 4.0% and operating
expenses by 1.7% in the first half of 2017, compared to the
prior-year period, mainly driven by increased sales and marketing
expenses, which more than offset savings in administrative and
warehousing costs.
Comparable operating profit increased by 26.8% in the first half
of 2017, compared to the prior-year period, reflecting the benefits
from our revenue growth management initiatives, which were only
partially offset by increased input costs, operating expenses and
adverse currency impact. Operating profit increased by 20.8% in the
first half of 2017, compared to the prior-year period, as the
benefits from our revenue growth management initiatives and lower
restructuring expenses were only partially offset by increased
input cost and operating expenses, the adverse foreign exchange
movements and the impact from the mark-to-market valuation of
commodity economic hedges.
Net finance costs declined by EUR17.5 million during the first
half of 2017, compared to the prior-year period, mainly driven by
the repayment in November 2016 of the 4.25% fixed rate bond and the
lower effective interest rate applied on the EUR600m bond issued in
March 2016.
On a comparable basis, the effective tax rate was approximately
25% for both the first half of 2017 and the first half of 2016. On
a reported basis, Coca-Cola HBC's effective tax rate was
approximately 25% for the first half of 2017, compared to 27% for
the first half of 2016. The Group's effective tax rate varies
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.
Comparable net profit increased by 39.4%, while net profit
increased by 36.9%, in the first half of 2017 compared to the
prior-year period, mainly driven by the higher operating
profitability and lower net finance costs, only partially offset by
increased taxes.
Balance sheet
As at
---------------------------------------
30 June 31 December Change
2017 2016 EUR
Assets EUR million EUR million million
------------- ------------- ---------
Total non-current assets 4,373.8 4,503.6 -129.8
Total current assets 2,355.5 2,061.3 294.2
Total assets 6,729.3 6,564.9 164.4
Liabilities
Total current liabilities 2,220.2 1,968.1 252.1
Total non-current liabilities 1,715.4 1,726.7 -11.3
Total liabilities 3,935.6 3,694.8 240.8
Equity
Owners of the parent 2,789.2 2,865.6 -76.4
Non-controlling interests 4.5 4.5 -
Total equity 2,793.7 2,870.1 -76.4
Total equity and liabilities 6,729.3 6,564.9 164.4
------------- ------------- ---------
Total non-current assets decreased by EUR129.8 million in the
first half of 2017, mainly due to the impact of foreign currency
translation. Net current assets increased by EUR42.1 million in the
first half of 2017, driven mainly by phasing in working capital and
the cash and cash equivalents generated by the Group in the period,
partially offset by declared dividends.
Cash flow
Half-Year
--------------------------------------
2017 2016 %
EUR million EUR million Change
------------- ------------- --------
Net cash from operating
activities(1) 258.9 374.9 -30.9%
Capital expenditure(1) (163.8) (135.1) 21.2%
Free cash flow(1) 95.1 239.8 -60.3%
------------- ------------- --------
(1) Refer to the 'Definitions and reconciliations of APMs' section.
Net cash from operating activities decreased by 30.9% or
EUR116.0 million, in the first half of 2017, compared to the
prior-year period, as increased operating profitability was more
than offset by taxes paid and phasing in working capital changes
that will normalise in the full year.
Capital expenditure, net of receipts from the disposal of assets
and including principal repayments of finance lease obligations,
increased by 21.2% in the first half of 2017, compared to the
prior-year period and represented 5.1% (first half of 2016: 4.4%)
of net sales revenue.
In the first half of 2017, capital expenditure amounted to
EUR163.8 million of which 48% was related to investment in
production equipment and facilities and 24% to the acquisition of
marketing equipment. In the first half of 2016, capital expenditure
amounted to EUR135.1 million of which 47% was related to investment
in production equipment and facilities and 29% to the acquisition
of marketing equipment.
In the first half of 2017, free cash flow declined by 60.3% or
EUR144.7 million, compared to the prior-year period, reflecting the
decreased cash from operating activities as well as increased
capital expenditure.
Supplementary Information
The volume, net sales revenue and net sales revenue per unit
case on a reported and FX-neutral base, are provided for NARTD and
premium spirits, as set out below:
Half-Year %
NARTD 2017 2016 Change
Volume (m unit cases)(1) 1,019.8 1,006.3 1.3%
Net sales revenue (EUR m) 3,124.1 2,978.1 4.9%
Net sales revenue per unit case
(EUR) 3.06 2.96 3.5%
FX-neutral net sales revenue (EUR
m) 3,124.1 2,968.1 5.3%
FX-neutral net sales revenue per
unit case (EUR) 3.06 2.95 3.9%
Half-Year %
Premium Spirits 2017 2016 Change
Volume (m unit cases)(1) 1.052 0.957 9.9%
Net sales revenue (EUR m) 89.3 65.8 35.7%
Net sales revenue per unit case
(EUR) 84.89 68.76 23.5%
FX-neutral net sales revenue (EUR
m) 89.3 71.7 24.5%
FX-neutral net sales revenue per
unit case (EUR) 84.89 74.92 13.3%
Half-Year %
Total 2017 2016 Change
Volume (m unit cases)(1) 1,020.9 1,007.3 1.4%
Net sales revenue (EUR m) 3,213.4 3,043.9 5.6%
Net sales revenue per unit case
(EUR) 3.15 3.02 4.2%
FX-neutral net sales revenue (EUR
m) 3,213.4 3,039.8 5.7%
FX-neutral net sales revenue per
unit case (EUR) 3.15 3.02 4.3%
() 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.
Definitions and reconciliations of Alternative Performance
Measures ("APMs")
1. Comparable APMs(1)
In discussing the performance of the Group, "comparable"
measures are used, which are calculated by deducting from the
directly reconcilable IFRS measures the impact of the Group's
restructuring costs, the mark-to-market valuation of the commodity
hedging activity and certain other tax items, which are
collectively considered as items impacting comparability, due to
their nature. More specifically the following items are considered
as items that impact comparability:
1) Restructuring costs
Restructuring costs comprise costs arising from significant
changes in the way the Group conducts business, such as significant
supply chain infrastructure changes, outsourcing of activities and
centralisation of processes. These costs are included within the
income statement line "Operating expenses". However, they are
excluded from the comparable results in order for the user to
obtain a better understanding of the Group's operating and
financial performance achieved from underlying activity.
2) Commodity hedging
The Group has entered into certain commodity derivative
transactions in order to hedge its exposure to commodity price
risk. Although these transactions are economic hedging activities
that aim to manage our exposure to sugar, aluminium and gas oil
price volatility, they do not qualify for hedge accounting. In
addition, the Group recognises certain derivatives embedded within
commodity purchase contracts that have been accounted for as
stand-alone derivatives and do not qualify for hedge accounting.
The fair value gains and losses on the derivatives and embedded
derivatives are immediately recognised in the income statement in
the cost of goods sold and operating expenses line items. The
Group's comparable results exclude the gains or losses resulting
from the mark-to-market valuation of these derivatives and embedded
derivatives. These gains or losses are reflected in the comparable
results in the period when the underlying transactions occur, to
match the profit or loss to that of the corresponding underlying
transactions. We believe this adjustment provides useful
information related to the impact of our economic risk management
activities.
3) Other tax items
Other tax items represent the tax impact of changes in income
tax rates affecting the opening balance of deferred tax arising
during the year, included in the Tax line item of the income
statement. These are excluded from comparable after tax results in
order for the user to obtain a better understanding of the Group's
underlying financial performance.
The Group discloses comparable performance measures to enable
users to focus on the underlying performance of the business on a
basis which is common to both periods for which these measures are
presented.
The reconciliation of comparable measures to the directly
related measures calculated in accordance with IFRS is as
follows:
(1) Comparable APMs refer to comparable COGS, comparable Gross
Profit, comparable Operating expenses, comparable EBIT, comparable
EBIT margin, comparable Adjusted EBITDA, comparable tax, comparable
net profit and comparable EPS.
Reconciliation of comparable financial indicators
(numbers in EUR million except per share data)
Half-year 2017
Gross Operating Adjusted Net EPS
COGS Profit expenses EBIT EBITDA Tax Profit(1) (EUR)
As reported (2,013.5) 1,199.9 (933.5) 266.4 423.2 (62.4) 191.6 0.526
Restructuring
costs - - 13.0 13.0 13.1 (3.5) 9.7 0.027
Commodity
hedging
loss / (gain) 11.5 11.5 0.2 11.7 11.7 (3.4) 8.3 0.023
Other tax
items - - - - - - - -
Comparable (2,002.0) 1,211.4 (920.3) 291.1 448.0 (69.3) 209.6 0.576
Half-year 2016
Gross Operating Adjusted Net EPS
COGS Profit expenses EBIT EBITDA Tax Profit(1) (EUR)
As reported (1,905.2) 1,138.7 (918.1) 220.6 395.7 (50.7) 140.0 0.387
Restructuring
costs - - 33.9 33.9 16.3 (6.9) 27.1 0.075
Commodity
hedging
loss / (gain) (24.0) (24.0) (0.9) (24.9) (24.9) 7.0 (17.9) (0.049)
Other tax
items - - - - - 1.2 1.2 0.003
---------- --------- ----------- ------- ---------- ------- ------------ --------
Comparable (1,929.2) 1,114.7 (885.1) 229.6 387.1 (49.4) 150.4 0.416
---------- --------- ----------- ------- ---------- ------- ------------ --------
(1) Net Profit and comparable net profit refer to net profit and
comparable net profit respectively after tax attributable to owners
of the parent. Net profit for 2017 includes EUR 0.2 million from
restructuring within joint ventures (2016: EUR 0.1 million).
Reconciliation of Comparable EBIT per reportable
segment (numbers in EUR million)
Half-year 2017
Established Developing Emerging Consolidated
EBIT 99.0 31.2 136.2 266.4
Restructuring costs 7.5 2.0 3.5 13.0
Commodity hedging 0.2 0.1 11.4 11.7
Comparable EBIT 106.7 33.3 151.1 291.1
Half-year 2016
Established Developing Emerging Consolidated
EBIT 97.5 39.5 83.6 220.6
Restructuring costs 9.1 4.9 19.9 33.9
Commodity hedging (2.8) (1.4) (20.7) (24.9)
Comparable EBIT 103.8 43.0 82.8 229.6
------------- ------------ ---------- -------------
2. FX-neutral APMs
The Group also evaluates its operating and financial performance
on an FX-neutral basis (i.e. without giving effect to the impact of
variation of foreign currency exchange rates from period to
period).
FX-neutral APMs are calculated by adjusting prior period amounts
for the impact of exchange rates applicable to the current period.
FX-neutral measures enable users to focus on the performance of the
business on a basis which is not affected by changes in foreign
currency exchange rates applicable to the Group's operating
activities from period to period. The most common FX-neutral
measures used by the Group are:
1) FX-neutral net sales revenue and FX-neutral net sales revenue per unit case
FX-neutral net sales revenue and FX-neutral net sales revenue
per unit case are calculated by adjusting prior-period net sales
revenue for the impact of changes in exchange rates applicable in
the current period.
2) FX-neutral comparable input costs per unit case
FX-neutral comparable input costs per unit case is calculated by
adjusting prior-period commodity costs and more specifically,
sugar, resin, aluminium and fuel commodity costs, excluding
commodity hedging as described above; and other raw materials costs
for the impact of changes in exchange rates applicable in the
current period.
The calculations of the FX-neutral APMs and the reconciliation
to the most directly related measures calculated in accordance with
IFRS is as follows:
Reconciliation of FX-neutral net sales revenue
per unit case (numbers in EUR million unless otherwise
stated)
Half-year 2017
Established Developing Emerging Consolidated
Net sales revenue 1,202.1 557.4 1,453.9 3,213.4
Currency impact - - - -
------------- ------------ ---------- -------------
FX-neutral net sales
revenue 1,202.1 557.4 1,453.9 3,213.4
Volume (m unit cases) 299.2 188.6 533.1 1,020.9
------------- ------------ ---------- -------------
FX-neutral net sales
revenue per unit case
(EUR) 4.02 2.96 2.73 3.15
------------- ------------ ---------- -------------
Half-year 2016
Established Developing Emerging Consolidated
Net sales revenue 1,192.6 526.8 1,324.5 3,043.9
Currency impact (1.9) 7.9 (10.1) (4.1)
------------- ------------ ---------- -------------
FX-neutral net sales
revenue 1,190.7 534.7 1,314.4 3,039.8
Volume (m unit cases) 296.9 187.1 523.3 1,007.3
FX-neutral net sales
revenue per unit case
(EUR) 4.01 2.86 2.51 3.02
------------- ------------ ---------- -------------
Reconciliation of FX-neutral input costs per unit
case (numbers in EUR million unless otherwise stated)
Half-year Half-year
2017 2016
----------- -----------
Input costs 862.9 746.2
Commodity hedging (11.5) 24.0
----------- -----------
Comparable input costs 851.4 770.2
Currency impact - 50.3
----------- -----------
FX-neutral comparable input costs 851.4 820.5
Volume (m unit cases) 1,020.9 1,007.3
----------- -----------
FX-neutral comparable input costs
per unit case (EUR) 0.83 0.81
----------- -----------
3. Other APMs
Adjusted EBITDA
Adjusted EBITDA is calculated by adding back to operating profit
the depreciation and impairment of property, plant and equipment,
the amortisation and impairment of intangible assets, the employee
share option and performance share costs and items, if any,
reported in line "Other non-cash items" of the consolidated cash
flow statement. Adjusted EBITDA is intended to provide useful
information to analyse the Group's operating performance excluding
the impact of operating non-cash items as defined above. It is also
intended to measure the level of financial leverage of the Group by
comparing Adjusted EBITDA to Net debt.
Adjusted EBITDA is not a measure of profitability and liquidity
under IFRS and has limitations, some of which are as follows:
Adjusted EBITDA does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements
for, our working capital needs; although depreciation and
amortisation are non-cash charges, the assets being depreciated and
amortised will often have to be replaced in the future, and
Adjusted EBITDA does not reflect any cash requirements for such
replacements. Because of these limitations, Adjusted EBITDA should
not be considered as a measure of discretionary cash available to
us and should be used only as a supplementary APM.
Free cash flow
Free cash flow is an APM used by the Group and defined as cash
generated by operating activities after payments for purchases of
property, plant and equipment net of proceeds from sales of
property, plant and equipment and including principal repayments of
finance lease obligations. Free cash flow is intended to measure
the cash generation from the Group's business, based on operating
activities, including the efficient use of working capital and
taking into account its net payments for purchases of property,
plant and equipment. The Group considers the purchase and disposal
of property, plant and equipment as ultimately non--discretionary
since ongoing investment in plant, machinery, technology and
marketing equipment, including coolers, is required to support the
day--to--day operations and the CCHBC Group's growth prospects. The
Group presents free cash flow because it believes the measure
assists users of the financial statements in understanding the
Group's cash generating performance as well as availability for
interest payment, dividend distribution and own retention. The free
cash flow measure is used by management for its own planning and
reporting purposes since it provides information on operating cash
flows, working capital changes and net capital expenditure that
local managers are most directly able to influence.
Free cash flow is not a measure of cash generation under IFRS
and has limitations, some of which are as follows: Free cash flow
does not represent the Group's residual cash flow available for
discretionary expenditures since the Group has debt payment
obligations that are not deducted from the measure; free cash flow
does not deduct cash flows used by the Group in other investing and
financing activities and free cash flow does not deduct certain
items settled in cash. Other companies in the industry in which the
Group operates may calculate free cash flow differently, limiting
its usefulness as a comparative measure.
Capital expenditure
The Group uses capital expenditure as an APM to ensure that the
cash spending is in line with its overall strategy for the use of
cash. Capital expenditure is defined as payments for purchases of
property, plant and equipment plus principal repayments of finance
lease obligations less proceeds from sale of property, plant and
equipment.
The following table illustrates how Adjusted EBITDA, Free Cash
Flow and Capital Expenditure are calculated:
Half-year
2017
EUR 2016
million EUR million
Operating profit (EBIT) 266.4 220.6
Depreciation and impairment of property,
plant and equipment 153.2 171.3
Amortisation of intangible assets 0.2 0.2
Employee stock options and performance
shares 3.5 3.6
Other non-cash items included in operating (0.1)
income -
Adjusted EBITDA 423.2 395.7
Gain on disposal of non-current assets (1.8) (3.4)
(Increase)/Decrease in working capital (101.4) 16.2
Tax paid (61.1) (33.6)
--------- -------------
Net cash from operating activities 258.9 374.9
--------- -------------
Payments for purchases of property,
plant and equipment (164.4) (148.3)
Principal repayments of finance lease
obligations (3.7) (3.6)
Proceeds from sale of property, plant
and equipment 4.3 16.8
--------- -------------
Capital expenditure (163.8) (135.1)
--------- -------------
Free cash flow 95.1 239.8
--------- -------------
Net debt
Net debt is an APM used by management to evaluate the Group's
capital structure and leverage. Net debt is defined as current
borrowings plus non-current borrowings less cash and cash
equivalents as illustrated below:
As at
30 June 31 December
2017 2016
EUR million EUR million
Current borrowings 159.9 156.5
Non-current borrowings 1,463.0 1,468.1
Cash and cash equivalents (648.7) (573.2)
------------- -------------
Net debt 974.2 1,051.4
------------- -------------
Principal risks and uncertainties
The principal risks and uncertainties to which the Company will
be exposed in the second half of 2017 are substantially the same as
those outlined in the 2016 Integrated Annual Report for the year
ended 31 December 2016, pages 19 to 21.
Defining our principal risks
Our strategic priorities provide the context for guiding us in
the management of both the material matters and the principal risks
faced by our business.
The overview of our most important risks, involving an
assessment of the likelihood of occurrence and potential
consequences, does not include all the risks that may ultimately
affect our Company. Some risks not yet known to us, or currently
believed to be immaterial, could ultimately have an impact on our
business or financial performance. We remain constantly vigilant to
changes to our economic and regulatory operating environments, to
ensure that we proactively identify and evaluate new risks and
understand threats to our business viability.
Our principal risks
Principal Risks Risk Potential impact Key mitigations Link to
material issues
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
1. Consumer Failure to adapt Health and
health to changing * Failure to achieve our growth plans * Focus on product innovation nutrition
consumer health
trends and Responsible
address * Damage to our brand and corporate reputation * Expand our range of low- and zero-calorie beverages marketing
misconceptions
about the health
impact of soft * Loss of consumer base * Introduce smaller entry packs
drinks.
* Reduce the calorie content of products in the
portfolio
* Clearer labelling on packaging
* Promote active lifestyles through consumer engagement
programmes focused on health and wellness
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
2. Foreign Foreign exchange Not applicable
Exchange exposure arises * Financial loss * Treasury Policy requires the hedging of 25% to 80% of
from changes in rolling 12-month forecast transactional exposure
exchange rates,
as well as * Asset impairment
currency * Hedging beyond 12 months may occur if forecast
devaluation in transactions are highly probable
combination with * Limitations on cash repatriation
capital
controls, which * Derivative financial instruments are used, where
restricts available, to reduce net exposure to currency
movement of fluctuations
funds and
increases the
risk of asset
impairment.
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
3. Climate, Failure to meet Carbon and
carbon and our * Long-term damage to our corporate reputation * Water stewardship programmes that reduce our water energy
water stakeholders' consumption and our footprint and assure sustainable
expectations in end-to-end water use Packaging,
making a * Less influence in shaping the citizenship and recycling and
positive sustainability agenda waste
contribution to * Carbon and energy management programmes management
the
sustainability * Reduced profitability Sustainable
agenda, * Packaging waste management programmes sourcing
particularly
relating to Water
climate change, * Partnering with NGOs and International NGOs on common stewardship
packaging waste issues such as nature conservation
and water usage.
* Partnering with local communities to minimise
environmental impact
* Focus on sustainable procurement
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
4. Channel mix A continued Not applicable
increase in the * Reduced profitability * Continued to increase our presence in the discounter
concentration of channel during 2016
retailers and
independent
wholesalers on * Working closely with our customers to identify
whom opportunities for joint value creation
we depend to
distribute our
products. * Right Execution Daily (RED) strategy continues to
The immediate support our commitment to operational excellence,
consumption enabling us to respond to changing customer needs
channel remains across all channels
under pressure
as consumers
alter
consumption
habits.
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
5. Declining Challenging and Direct and
consumer demand volatile * Eroded consumer confidence affecting spending * Seek to offer the right brand, at the right price, in indirect
macroeconomic, the right package through the right channel economic
security and impacts
political * Inflationary pressures
conditions can * Robust security practices and procedures to protect
affect consumer people and assets
demand and * Social unrest
create security
risks across our * Crisis response and business continuity strategies
diverse mix of * Safety of people and security of assets
markets.
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
6. Regulations on Not applicable
Discrimina-tory consumer health * Reduction in * Proactively working with governments and regulatory
tax and the risk of authorities to ensure that the facts are clearly
the targeting of understood and that our products are not singled out
our products for profitability unfairly
discriminatory
tax and
packaging waste * Shaping the sustainability agenda as it relates to
recovery. packaging and waste recovery
* Engaging with stakeholders including NGOs and the
communities in which we operate on strategies to
protect the environment
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
7. Quality The occurrence Product quality
of quality * Reduction in volume and net sales revenue * Stringent quality processes in place to minimise the and integrity
issues, or the occurrence of quality issues
contamination of
our products. * Damage to brand and corporate reputation
* Early warning systems (Consumer Information Centres
and social media monitoring) that enable issue
* Loss of consumer trust identification
* Robust response processes and systems that enable us
to quickly and efficiently deal with quality issues,
ensuring customers and consumers retain confidence in
our products
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
8. Regulatory Inadvertent Corporate
challenges non-compliance, * Damage to our corporate reputation * Annual 'Tone from the Top' messaging governance,
by the Company business
or related third ethics and
parties, with * Significant financial penalties * Code of Business Conduct training and awareness anti-corruption
local
laws and Human rights
regulations, * Management time diverted to resolving legal issues * Anti-Bribery Policy and commercial compliance and diversity
that training
exist across our
diverse mix of
markets. * Internal control assurance programme with local
management accountability
* Risk-based internal control framework
* 'Speak Up' hotline
* Legal function in constant dialogue with regulators
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
9. People and Inability to Employee
talent attract and * Failure to achieve our growth plans * Focus on developing leadership talent well-being and
retain engagement
sufficient
numbers of * Right people in the right positions across the
qualified and business
experienced
employees
in competitive * Focus on employee engagement ensuring support for our
talent markets values
and an inability
to ensure their
ongoing * Promote operational excellence
engagement and
commitment.
* Create shared value with the communities in which we
work to ensure we are seen as an attractive employer
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
10. System Business Not applicable
availability stoppage due to * Financial loss * Monitoring, identifying and addressing cyber threats
and cyber applications or and suspicious internal computer activity
attacks systems
unavailability, * Operational disruption
or a loss of * Training on information management and the protection
personal data, of information
arising from * Damage to corporate reputation
data centre
failure or other * Disaster recovery testing and building resilience
internal or * Non-compliance with statutory data protection into our cyber risk programme
external legislation
cyber threats
and
vulnerabilities.
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
11. Change Failure to Not applicable
management effectively * Under-delivery of expected transformation results * Project plans and change management strategies in
execute major place
business
transformations, * Disengaged employees
or performance * Board and Operating Committee conduct regular
issues with tracking of the actual performance compared to
third-party * Reduction in profitability business case
providers that
we deploy as
part of * Market confidence in our ability to deliver on
our business strategy is weakened
transformation.
* Damage to corporate reputation
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
12. Strategic We rely on our Not applicable
stakeholder strategic * Termination of agreements or unfavourable renewal * Management focus on effective
relationships relationships terms could adversely affect profitability
and agreements
with The day-to-day interaction with our strategic partners
Coca-Cola * Working together as effective partners for growth
Company, Monster
Energy and our
Premium Spirits * Engagement in joint projects and business planning
partners. with a focus on strategic issues
* Participation in 'Top to Top' senior management
forums
---------------- ----------------- --------------------------------------------------------- ------------------------------------------------------------- ----------------
Related party transactions
Related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of CCHBC during
the period, as well as any changes in the related party
transactions as described in the 2016 Integrated Annual Report that
could have a material effect on the financial position or
performance of the Group in the first six months of current
financial year, are described in section "Condensed consolidated
interim financial statements for the six months ended 30 June
2017", note 13 "Related party transactions".
Going concern statement
The Group has considerable financial resources together with
long term contracts with a number of customers and suppliers across
different countries. Accordingly, and having reassessed the
principal risks, the Directors continue to adopt the going concern
basis of accounting in preparing these condensed consolidated
interim financial statements and have not identified any material
uncertainties to the Group's ability to continue to do so over a
period of at least 12 months from the date of approval of these
condensed consolidated interim financial statements.
Responsibility statement
The Directors of the Company, whose names are set out below,
confirm that to the best of their knowledge:
(a) the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34, Interim Financial
Reporting as issued by the IASB and give a true and fair view of
the assets, liabilities, financial position and profit or loss of
the undertakings included in the consolidation as a whole for the
period ended 30 June 2017 as required by the Disclosure Guidance
and Transparency Rules sourcebook of the UK FCA ("DTR") 4.2.4R;
and
(b) the interim management report includes a fair review of the
information required by:
-- DTR 4.2.7R of the DTRs, being an indication of important
events that have occurred during the first six months of the
current financial year and their impact on the condensed
consolidated interim financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- DTR 4.2.8 R of the DTRs, being related party transactions
that have taken place in the first six months of the current
financial year and that have materially affected the financial
position or performance of the Group during that period, and any
changes in the related party transactions described in the 2016
Integrated Annual Report for Coca-Cola HBC AG and its subsidiaries
for the year ended 31 December 2016, that could have a material
effect on the financial position or performance of the Group in the
first six months of the current financial year.
Name Title
Anastassis G. Non-Executive Chairman
David
Dimitris Lois Chief Executive Officer
Anastasios I. Non-Executive Director
Leventis
Christo Leventis Non-Executive Director
José Octavio Non-Executive Director
Reyes
Ahmet C. Bozer Non-Executive Director
Robert Ryan Rudolph Non-Executive Director
Reto Francioni Senior Independent Non-Executive
Director
Charlotte J. Boyle Independent Non-Executive
Director
John P. Sechi Independent Non-Executive
Director
Alexandra Papalexopoulou Independent Non-Executive
Director
Olusola (Sola) Independent Non-Executive
David-Borha Director
William W. (Bill) Independent Non-Executive
Douglas III Director
Signed on behalf of the Board
Dimitris Lois
Chief Executive
Officer
10 August 2017
Independent review report to Coca-Cola HBC AG
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements (the "interim financial statements") in the half-yearly
financial report of Coca-Cola HBC AG (the "Company") for the six
months ended 30 June 2017. Based on our review, nothing has come to
our attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as issued by the International Accounting
Standards Board and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated interim balance sheet as at 30 June 2017;
-- the condensed consolidated interim income statement for the six month period then ended;
-- the condensed consolidated interim statement of comprehensive
income for the six month period then ended;
-- the condensed consolidated interim statement of changes in
equity for the six month period then ended;
-- the condensed consolidated interim cash flow statement for
the six month period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards
Board.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors of the Company. The directors are
responsible for preparing the half-yearly financial report in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the Company a conclusion on
the interim financial statements in the half-yearly financial
report based on our review. This report, including the conclusion,
has been prepared for and only for the Company for the purpose of
complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Marios Psaltis
the Certified Auditor, Reg. No. 38081
for and on behalf of PricewaterhouseCoopers S.A.
Certified Auditors, Reg. No. 113
10 August 2017
Athens, Greece
Notes:
(a) The maintenance and integrity of the Company's website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
(b) Legislation in the United Kingdom and Switzerland governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Condensed consolidated interim financial statements for the six
months ended 30 June 2017
Condensed consolidated interim income statement
(unaudited)
Six months Six months
ended ended
30 June 2017 1 July 2016
Note EUR million EUR million
---------------------------- ---- ------------- ------------
Net sales revenue 3 3,213.4 3,043.9
Cost of goods sold (2,013.5) (1,905.2)
---------------------------- ---- ------------- ------------
Gross profit 1,199.9 1,138.7
Operating expenses 4 (933.5) (918.1)
Operating profit 3 266.4 220.6
Finance costs, net 5 (17.5) (35.0)
Share of results of equity
method investments 5.3 5.3
---------------------------- ---- ------------- ------------
Profit before tax 254.2 190.9
Tax 6 (62.4) (50.7)
Profit after tax 191.8 140.2
---------------------------- ---- ------------- ------------
Attributable to:
Owners of the parent 191.6 140.0
Non-controlling interests 0.2 0.2
---------------------------- ---- ------------- ------------
191.8 140.2
---------------------------- ---- ------------- ------------
Basic earnings per share
(EUR) 7 0.53 0.39
Diluted earnings per share
(EUR) 7 0.52 0.39
The accompanying notes form an integral part of these condensed
consolidated interim financial statements
Condensed consolidated interim statement of comprehensive
income (unaudited)
Six months
ended Six months
30 June ended
2017 1 July 2016
EUR million EUR million
---------------------------------------------- ------------------------------------------ --------------
Profit after tax 191.8 140.2
Other comprehensive income:
Items that may be subsequently
reclassified to income statement:
Valuation gain/(loss) on available-for-sale
assets 0.1 (0.2)
Cash flow hedges:
Net losses during the period (4.6) (43.2)
Net losses reclassified to
income statement for the period 4.4 3.2
Transfers to inventory for the
period 10.2 10.0 1.3 (38.7)
----------------------- ------
Foreign currency translation (150.6) (171.1)
Share of other comprehensive loss
of equity method investments (4.8) (7.5)
Income tax relating to items that
may be subsequently reclassified
to income statement (1.2) 2.1
---------------------------------------------- ------------------------------------------ --------------
(146.5) (215.4)
Items that will not be subsequently
reclassified to income statement:
Actuarial gains / (losses) 13.8 (70.6)
Income tax relating to items that
will not be subsequently reclassified
to income statement (2.4) 13.5
---------------------------------------------- ------------------------------------------ --------------
11.4 (57.1)
---------------------------------------------- ------------------------------------------ --------------
Other comprehensive loss for the
period, net of tax (135.1) (272.5)
---------------------------------------------- ------------------------------------------ --------------
Total comprehensive income / (loss)
for the period 56.7 (132.3)
---------------------------------------------- ------------------------------------------ --------------
Total comprehensive income / (loss)
for the period
Owners of the parent 56.5 (132.5)
Non-controlling interests 0.2 0.2
---------------------------------------------- ------------------------------------------ --------------
56.7 (132.3)
---------------------------------------------- ------------------------------------------ --------------
Condensed consolidated interim balance sheet (unaudited)
As at
As at 31 December
30 June 2017 2016
Note EUR million EUR million
------------------------------ ------ ------------- ------------
Assets
Intangible assets 8 1,863.3 1,885.7
Property, plant and equipment 8 2,314.6 2,406.6
Other non-current assets 195.9 211.3
------------------------------ ------ ------------- ------------
Total non-current assets 4,373.8 4,503.6
------------------------------ ------ ------------- ------------
Inventories 527.2 431.5
Trade and other receivables 1,159.6 1,044.8
Cash and cash equivalents 10 648.7 573.2
------------------------------ ------ ------------- ------------
2,335.5 2,049.5
Assets classified as held
for sale 20.0 11.8
------------------------------ ------ ------------- ------------
Total current assets 2,355.5 2,061.3
------------------------------ ------ ------------- ------------
Total assets 6,729.3 6,564.9
------------------------------ ------ ------------- ------------
Liabilities
Borrowings 10 159.9 156.5
Other current liabilities 2,060.3 1,811.6
------------------------------ ------ ------------- ------------
Total current liabilities 2,220.2 1,968.1
------------------------------ ------ ------------- ------------
Borrowings 10 1,463.0 1,468.1
Other non-current liabilities 252.4 258.6
------------------------------ ------ ------------- ------------
Total non-current liabilities 1,715.4 1,726.7
------------------------------ ------ ------------- ------------
Total liabilities 3,935.6 3,694.8
Equity
Owners of the parent 2,789.2 2,865.6
Non-controlling interests 4.5 4.5
------------------------------ ------ ------------- ------------
Total equity 2,793.7 2,870.1
------------------------------ ------ ------------- ------------
Total equity and liabilities 6,729.3 6,564.9
------------------------------ ------ ------------- ------------
Condensed consolidated interim statement of changes in
equity (unaudited)
Attributable to owners of the parent
Exchange Non-
Share Share Group Treasury equalisation Other Retained controlling Total
capital Premium Reorganisation shares reserve reserves earnings Total interests equity
EUR EUR reserve EUR EUR EUR EUR EUR EUR EUR
million million EUR million million million million million million million million
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Balance as at
1 January 2016 2,000.1 5,028.3 (6,472.1) (132.0) (681.4) 260.4 2,816.5 2,819.8 4.3 2,824.1
Shares issued
to employees
exercising
stock
options 1.1 1.4 - - - - - 2.5 - 2.5
Share-based
compensation:
Options and
performance
shares - - - - - 3.6 - 3.6 - 3.6
Sale of own
shares - - - 1.9 - - - 1.9 - 1.9
Appropriation
of reserves - - - 0.1 - 6.0 (6.1) - - -
Dividends (note
12) - (146.1) - - - - 1.4 (144.7) (0.2) (144.9)
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
2,001.2 4,883.6 (6,472.1) (130.0) (681.4) 270.0 2,811.8 2,683.1 4.1 2,687.2
Profit for the
period net of
tax - - - - - - 140.0 140.0 0.2 140.2
Other
comprehensive
loss for the
period, net
of tax - - - - (178.6) (36.8) (57.1) (272.5) - (272.5)
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Total
comprehensive
loss for the
period net of
tax (1) - - - - (178.6) (36.8) 82.9 (132.5) 0.2 (132.3)
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Balance as at
1 July 2016 2,001.2 4,883.6 (6,472.1) (130.0) (860.0) 233.2 2,894.7 2,550.6 4.3 2,554.9
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Shares issued
to employees
exercising
stock
options 8.0 11.1 - - - - - 19.1 - 19.1
Share-based
compensation:
Options and
performance
shares - - - - - 4.5 - 4.5 - 4.5
Movement in
shares held
for equity
compensation
plan - - - (0.4) - - - (0.4) - (0.4)
Sale of own
shares - - - 1.2 - - - 1.2 - 1.2
Cancellation
of shares
(note
11) (18.4) (40.1) - 58.5 - - - - - -
Appropriation
of reserves - - - - - 0.9 (0.9) - - -
Dividends - - - - - - - - (0.1) (0.1)
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
1,990.8 4,854.6 (6,472.1) (70.7) (860.0) 238.6 2,893.8 2,575.0 4.2 2,579.2
Profit for the
period net of
tax - - - - - - 203.5 203.5 0.3 203.8
Other
comprehensive
income for the
period, net
of tax - - - - 58.2 6.5 22.4 87.1 - 87.1
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Total
comprehensive
income for the
period net of
tax - - - - 58.2 6.5 225.9 290.6 0.3 290.9
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Balance as at
31 December
2016 1,990.8 4,854.6 (6,472.1) (70.7) (801.8) 245.1 3,119.7 2,865.6 4.5 2,870.1
--------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
(1) The amount included in the exchange equalisation reserve of
EUR178.6 million loss for the first half of 2016 represents the
exchange loss attributed to the owners of the parent, including
EUR7.5 million loss relating to share of other comprehensive income
of equity method investments.
The amount included in other reserves of EUR36.8 million loss
for the first half of 2016 consists of loss on valuation of
available-for-sale financial assets of EUR0.2 million, cash flow
hedges losses of EUR38.7 million, and the deferred tax income
thereof amounting to EUR2.1 million.
The amount of EUR82.9 million gain attributable to owners of the
parent comprises profit for the period of EUR140.0 million minus
actuarial loss of EUR70.6 million less deferred tax income of
EUR13.5 million. The actuarial loss is attributed to a decrease in
discount rates of plans in the established markets.
The amount of EUR0.2 million gain included in non-controlling
interests for the first half of 2016 represents the share of
non-controlling interests in retained earnings.
Condensed consolidated interim statement of changes in
equity (unaudited)
Attributable to owners of the parent
Exchange Non-
Share Share Group Treasury equalisation Other Retained controlling Total
Capital Premium Reorganisation shares reserve reserves earnings Total interests equity
EUR EUR reserve EUR EUR EUR EUR EUR EUR EUR
million million EUR million million million million million million million million
-------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Balance as at
1 January
2017 1,990.8 4,854.6 (6,472.1) (70.7) (801.8) 245.1 3,119.7 2,865.6 4.5 2,870.1
Shares issued
to employees
exercising
stock
options 8.9 15.2 - - - - - 24.1 - 24.1
Share-based
compensation:
Options and
performance
shares - - - - - 3.5 - 3.5 - 3.5
Appropriation
of reserves - - - - - 0.1 (0.1) - - -
Dividends
(note
12) - (162.0) - - - - 1.5 (160.5) (0.2) (160.7)
-------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
1,999.7 4,707.8 (6,472.1) (70.7) (801.8) 248.7 3,121.1 2,732.7 4.3 2,737.0
Profit for the
period net of
tax - - - - - - 191.6 191.6 0.2 191.8
Other
comprehensive
loss for the
period, net
of tax - - - - (155.4) 8.9 11.4 (135.1) - (135.1)
-------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Total
comprehensive
income for
the
period net of
tax(2) - - - - (155.4) 8.9 203.0 56.5 0.2 56.7
-------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
Balance as at
30 June 2017 1,999.7 4,707.8 (6,472.1) (70.7) (957.2) 257.6 3,324.1 2,789.2 4.5 2,793.7
-------------- ------- ------- -------------- -------- ------------ -------- -------- -------- ----------- --------
(2) The amount included in the exchange equalisation reserve of
EUR155.4 million loss for the first half of 2017 represents the
exchange loss attributed to the owners of the parent, including EUR
4.8 million loss relating to share of other comprehensive income of
equity method investments.
The amount included in other reserves of EUR8.9 million gain for
the first half of 2017 consists of gain on valuation of
available-for-sale financial assets of EUR0.1 million, cash flow
hedges gains of EUR10.0 million, and the deferred tax expense there
of amounting to EUR1.2 million.
The amount of EUR203.0 million gain attributable to owners of
the parent comprises profit for the period of EUR191.6 million plus
actuarial gain of EUR13.8 million less deferred tax expense of
EUR2.4 million. The actuarial gain is mainly attributed to an
increase in discount rates of plans in the established markets.
The amount of EUR0.2 million gain included in non-controlling
interests for the first half of 2017 represents the share of
non-controlling interests in retained earnings.
Condensed consolidated interim cash flow statement
(unaudited)
Six months Six months
ended ended
30 June 1 July
2017 2016
Note EUR million EUR million
---------------------------------------- ----- ------------ ------------
Operating activities
Profit after tax for the period 191.8 140.2
Finance costs, net 5 17.5 35.0
Share of results of equity method
investments (5.3) (5.3)
Tax charged to the income statement 62.4 50.7
Depreciation and impairment
of property, plant and equipment 8 153.2 171.3
Employee stock options and performance
shares 3.5 3.6
Amortisation of intangible assets 8 0.2 0.2
Other non- cash items (0.1) -
423.2 395.7
Gain on disposal of non-current
assets (1.8) (3.4)
Increase in inventories (115.2) (64.9)
Increase in trade and other
receivables (132.6) (185.3)
Increase in trade and other
payables 146.4 266.4
Tax paid (61.1) (33.6)
---------------------------------------- ----- ------------ ------------
Net cash from operating activities 258.9 374.9
---------------------------------------- ----- ------------ ------------
Investing activities
Payments for purchases of property,
plant and equipment (164.4) (148.3)
Payments for purchases of intangible
assets (1.8) -
Proceeds from sales of property,
plant and equipment 4.3 16.8
Payments for investments in
financial assets (5.4) -
Net receipts from / (payments
for) equity investments 13 5.6 (6.6)
Interest received 3.8 3.1
Loans to related parties 0.9 -
Payments for acquisition of
subsidiary - (19.5)
Net cash used in investing activities (157.0) (154.5)
---------------------------------------- ----- ------------ ------------
Financing activities
Proceeds from shares issued
to employees exercising stock
options 11 24.1 2.5
Payments for shares held by
non-controlling interests (0.3) (0.5)
Proceeds from sale of own shares - 0.4
Proceeds from borrowings 10 30.8 632.5
Repayments of borrowings 10 (35.4) (270.6)
Principal repayments of finance
lease obligations (3.7) (3.6)
Payments for settlement of forward
starting swaps - (55.4)
Interest paid (20.3) (38.2)
Net cash (used in) / from financing
activities (4.8) 267.1
---------------------------------------- ----- ------------ ------------
Increase in cash and cash equivalents 97.1 487.5
---------------------------------------- ----- ------------ ------------
Movement in cash and cash equivalents
Cash and cash equivalents at
1 January 573.2 487.4
Increase in cash and cash equivalents 97.1 487.5
Effect of changes in exchange
rates (21.6) (45.8)
Cash and cash equivalents at
the end of the period 648.7 929.1
---------------------------------------- ----- ------------ ------------
Selected explanatory notes to the condensed consolidated interim
financial statements (unaudited)
1. Accounting policies and basis of preparation
a) Accounting policies
The accounting policies used in the preparation of the condensed
consolidated interim financial statements of Coca-Cola HBC AG
('Coca-Cola HBC', the 'Company' or the 'Group') are consistent with
those used in the 2016 annual financial statements, except for the
adoption of applicable amendments to standards, effective 1 January
2017. The adoption of the amended standards did not have any impact
on the current or prior periods but it is expected that it will
impact the disclosures in 2017 annual consolidated financial
statements.
b) Basis of preparation
Operating results for the first half of 2017 are not indicative
of the results that may be expected for the year ending 31 December
2017 because of business seasonality. Business seasonality results
from higher unit sales of the Group's products in the warmer months
of the year. The Group's methods of accounting for fixed costs such
as depreciation and interest expense are not affected by business
seasonality.
Costs that are incurred unevenly during the financial year are
anticipated or deferred in the interim report only if it would also
be appropriate to anticipate or defer such costs at the end of the
financial year.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual profit or
loss.
These condensed consolidated interim financial statements are
prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB") applicable to Interim Financial Reporting
("IAS 34"). These condensed consolidated interim financial
statements should be read in conjunction with the 2016 annual
financial statements, which include a full description of the
Group's accounting policies and have been prepared in accordance
with IFRS as issued by the IASB.
2. Foreign currency and translation
The Group's reporting currency is the Euro (EUR). Coca-Cola HBC
translates the income statements of foreign operations to the Euro
at average exchange rates and the balance sheets at the closing
exchange rates at 30 June. The principal exchange rates used for
translation purposes in respect of one Euro are:
Average rate for the Closing rate as at
six months ended
30 June 2017 1 July 2016 30 June 2017 31 December
2016
-------------- ------------ ----------- ------------ -----------
US dollar 1.08 1.12 1.14 1.04
UK sterling 0.86 0.78 0.88 0.85
Polish zloty 4.27 4.37 4.23 4.40
Nigerian
naira 332.22 225.61 418.61 317.95
Hungarian
forint 309.53 312.66 309.29 309.22
Swiss franc 1.08 1.10 1.09 1.07
Russian
rouble 62.70 78.58 67.40 64.72
Romanian
leu 4.54 4.50 4.55 4.54
Ukrainian
hryvnia 28.97 28.40 29.41 27.97
Czech koruna 26.79 27.04 26.30 27.02
Serbian
dinar 123.44 122.89 121.32 123.30
-------------- ------------ ----------- ------------ -----------
3. Segmental analysis
The Group has one business, being the production, sale and
distribution of ready-to-drink, primarily non-alcoholic, beverages.
The Group operates in 28 countries which are aggregated in
reportable segments as follows:
Established markets: Austria, Cyprus, Greece, Italy, Northern Ireland, the Republic of Ireland and Switzerland.
Developing markets: Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.
Emerging markets: Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, FYROM, Moldova, Montenegro, Nigeria,
Romania,
the Russian Federation, Serbia (including the Republic of Kosovo) and Ukraine.
a) Volume and net sales revenue
The Group sales volume in million unit cases(1) was as
follows:
Six months ended
30 June 2017 1 July 2016
-------------- ------------- ------------
Established 299.2 296.9
Developing 188.6 187.1
Emerging 533.1 523.3
-------------- ------------- ------------
Total volume 1,020.9 1,007.3
-------------- ------------- ------------
(1) One unit case corresponds to approximately 5.678 litres or
24 servings, being a typically used measure of volume. Volume data
is derived from unaudited operational data.
Net sales revenue per reportable segment for the six months
ended 30 June 2017 and 1 July 2016 is presented in the table
below:
Six months ended
30 June 2017 1 July 2016
EUR million EUR million
------------------------- ------------- -------------
Established 1,202.1 1,192.6
Developing 557.4 526.8
Emerging 1,453.9 1,324.5
------------------------- ------------- -------------
Total net sales revenue 3,213.4 3,043.9
------------------------- ------------- -------------
In addition to non-alcoholic ready to drink beverages ("NARTD"),
the Group sells and distributes premium spirits. An analysis of
volume and net sales revenue per product type for the six months
ended 30 June 2017 and 1 July 2016 is presented below:
Six months ended
30 June 2017 1 July 2016
-------------------------------- ------------- ------------
Volume in million unit cases(1)
NARTD(2) 1,019.8 1,006.3
Premium spirits(1) 1.1 1.0
Total volume 1,020.9 1,007.3
-------------------------------- ------------- ------------
Net sales revenue (EUR million)
NARTD 3,124.1 2,978.1
Premium spirits 89.3 65.8
Total net sales revenue 3,213.4 3,043.9
-------------------------------- ------------- ------------
(1) 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.
Volume data is derived from unaudited operational data.
(2) NARTD: non-alcoholic, ready-to-drink beverages.
b) Other income statement items
Six months ended
30 June 2017 1 July 2016
EUR million EUR million
------------------------------ ------------- -------------
Operating profit
Established 99.0 97.5
Developing 31.2 39.5
Emerging 136.2 83.6
------------------------------ ------------- -------------
Total operating profit 266.4 220.6
------------------------------ ------------- -------------
Reconciling items
Finance costs, net (17.5) (35.0)
Tax (62.4) (50.7)
Share of results of equity
method investments 5.3 5.3
Non-controlling interests (0.2) (0.2)
------------------------------ ------------- -------------
Profit after tax attributable
to owners of the parent 191.6 140.0
------------------------------ ------------- -------------
c) Other items
The macroeconomic conditions in Nigeria remain volatile. Our
2017 first half year revenue of our operations in Nigeria amounted
to 10% of consolidated net sales revenue; as at 30 June 2017
non-current assets of our operations in Nigeria amounted to 8% of
the consolidated non-current assets. As at the end of June 2017 a
foreign currency translation loss of EUR116.5 million has been
recognised within other comprehensive income of the consolidated
statement of comprehensive income for the period. The Group is
continuously monitoring the situation in Nigeria in order to ensure
that timely actions and initiatives are undertaken to minimise
potential adverse impact on its performance.
The ongoing challenges in the Greek banking sector, the
continuation of capital controls restricting the movement of funds
out of Greece and the ongoing need for austerity measures, may
further impact consumers' disposable income which may adversely
affect the Group's operations in Greece for the second half of
2017. Our 2017 first half year revenue of our operations in Greece
amounted to 7% of consolidated net sales revenue and as at 30 June
2017 non-current assets amounted to 4% of the consolidated
non-current assets. We are continuously monitoring developments in
Greece.
4. Restructuring expenses
As part of the effort to optimise its cost base and sustain
competitiveness in the marketplace, the Company undertakes
restructuring initiatives. The restructuring concerns mainly
employees' costs and impairment of property, plant and equipment
and are included within operating expenses. Restructuring expenses
per reportable segment for the six months ended 30 June 2017 and 1
July 2016 are presented below:
Six months ended
30 June 1 July 2016
2017 EUR million
EUR million
------------------------------ ------------- --------------
Established 7.5 9.1
Developing 2.0 4.9
Emerging 3.5 19.9
------------------------------ ------------- --------------
Total restructuring expenses 13.0 33.9
------------------------------ ------------- --------------
5. Finance costs, net
Six months ended
30 June
2017 1 July 2016
EUR million EUR million
---------------------------- ------------ ------------
Interest income (4.8) (3.2)
Finance costs 21.8 37.5
Net foreign exchange losses 0.5 0.7
Finance costs, net 17.5 35.0
---------------------------- ------------ ------------
6. Tax
Six months ended
30 June
2017 1 July 2016
EUR million EUR million
------------------- ------------ ------------
Profit before tax 254.2 190.9
Tax (62.4) (50.7)
Effective tax rate 25% 27%
-------------------- ------------ ------------
The Group's effective tax rate for 2017 may differ from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities, as a
consequence of a number of factors, the most significant of which
are the application of statutory tax rates of the countries in
which the Group operates, the non-deductibility of certain
expenses, the non-taxable income and one off tax items.
7. Earnings per share
Basic earnings per share is calculated by dividing the net
profit attributable to the owners of the parent by the weighted
average number of shares outstanding during the period (first half
of 2017: 363,917,901, first half of 2016: 361,579,709). Diluted
earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all
dilutive ordinary shares arising from exercising employee stock
options.
8. Intangible assets and property, plant and equipment
Property,
Intangible plant
assets and equipment
EUR million EUR million
------------------------------------------ ------------ --------------
Net book value as at 1 January
2017 1,885.7 2,406.6
Additions 1.8 197.3
Reclassified to assets held for
sale - (8.6)
Disposals - (1.4)
Depreciation, impairment and amortisation (0.2) (153.2)
Foreign currency translation (24.0) (126.1)
Net book value as at 30 June 2017 1,863.3 2,314.6
------------------------------------------- ------------ --------------
9. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, interest rate risk,
and commodity price risk), credit risk, liquidity risk and capital
risk. There have been no changes in the risk management policies
since the year end.
The Group's financial instruments recorded at fair value are
included in Level 2 within the fair value hierarchy. The financial
instruments include derivatives for which there have been no
changes in valuation techniques and inputs used to determine their
fair value since 31 December 2016 (as described in the 2016
Integrated Annual Report available on the Coca-Cola HBC's web site:
www.coca-colahellenic.com). As at 30 June 2017, the total
derivatives included in Level 2 were financial assets of EUR22.8
million and financial liabilities of EUR10.0 million.
The Group recognises embedded derivatives whose risks and
economic characteristics were not considered to be closely related
to the commodity contract in which they were embedded. The
valuation techniques used to determine their fair value maximised
the use of observable market data. The fair value of the embedded
derivatives as at 30 June 2017 amounted to a financial asset of
EUR1.8 million and are classified within Level 2.
There were no transfers between Level 1, 2 and 3 during the
first six months of 2017. The fair value of bonds and notes payable
applying the clean market price, as at 30 June 2017, was EUR1,482.1
million compared to their book value of EUR1,392.7 million, as at
the same date.
10. Net debt
As at
31 December
30 June 2017 2016
EUR million EUR million
-------------------------------- ------------ ------------
Current borrowings 159.9 156.5
Non-current borrowings 1,463.0 1,468.1
Less: Cash and cash equivalents (648.7) (573.2)
--------------------------------- ------------ ------------
Net debt 974.2 1,051.4
--------------------------------- ------------ ------------
In March 2016 the Group completed the issue of a EUR600 million
Euro-denominated fixed rate bond maturing in November 2024. The net
proceeds of the new issue were used to repay the EUR600 million
4.25%, 7-year fixed rate bond which matured in November 2016.
Cash and cash equivalents include an amount of EUR65.8 million
equivalent in Nigerian naira and EUR0.2 million held by the Group's
subsidiary, Nigerian Bottling company Ltd, including an amount of
EUR13.1 million equivalent in Nigerian aira, which relates to the
outstanding balance of the bank account held for the repayment of
its former minority shareholders, following the 2011 acquisition of
non-controlling interests. Cash and cash equivalents held by our
subsidiaries in Greece of EUR7.9 million were subject to capital
controls as at 30 June 2017.
11. Share capital and share premium
Number
of
shares Share Share
(authorised capital premium
EUR EUR
and issued) million million
-------------------------------- ------------ --------- ---------
Balance as at 1 January 2016 368,141,297 2,000.1 5,028.3
Shares issued to employees
exercising
stock options 1,499,341 9.1 12.5
Cancellation of shares (3,000,000) (18.4) (40.1)
Dividends (note 12) - - (146.1)
-------------------------------- ------------ --------- ---------
Balance as at 31 December 2016 366,640,638 1,990.8 4,854.6
-------------------------------- ------------ --------- ---------
Shares issued to employees
exercising
stock options 1,447,169 8.9 15.2
Dividends (note 12) - - (162.0)
-------------------------------- ------------ --------- ---------
Balance as at 30 June 2017 368,087,807 1,999.7 4,707.8
-------------------------------- ------------ --------- ---------
On 23 June 2015, the Annual General Meeting adopted a proposal
for share buy-back of up to 3,000,000 ordinary shares of Coca-Cola
HBC for the purpose of neutralising the dilution resulting from
shares issues under Coca-Cola HBC's equity compensation plans. The
program was completed in full during 2015 for a consideration of
EUR58.5 million. On 21 June 2016, the Annual General Meeting
approved the proposal to reduce the share capital of Coca-Cola HBC
AG by cancelling the 3,000,000 treasury shares acquired as part of
the share buy-back programme described above. The respective
reduction of the share capital was completed in September 2016.
In 2016, the share capital of Coca-Cola HBC increased by the
issue of 1,499,341 new ordinary shares following the exercise of
stock options pursuant to the Coca-Cola HBC AG's employees' stock
option plan. Total proceeds from the issuance of the shares under
the stock option plan amounted to EUR21.6 million.
For the six months ended 30 June 2017, the share capital of
Coca-Cola HBC increased by the issue of 1,447,169 new ordinary
shares following the exercise of stock options pursuant to the
Coca-Cola HBC AG's employees' stock option plan. Total proceeds
from the issuance of the shares under the stock option plan
amounted to EUR24.1 million.
Following the above changes, on 30 June 2017 the share capital
of the Group amounted to EUR1,999.7 million and comprised
368,087,807 shares with a nominal value of CHF 6.70 each.
12. Dividends
The shareholders of Coca-Cola HBC AG approved the dividend
distribution of 0.44 euro cents per share at the Annual General
Meeting held on 20 June 2017. The total dividend amounted to
EUR162.0 million and was paid on 25 July 2017. Of this an amount of
EUR1.5 million relates to shares held by the Group.
On 21 June 2016, the shareholders of Coca-Cola HBC AG at the
Annual General Meeting approved the dividend distribution of 0.40
euro cents per share. The total dividend amounted to EUR146.1
million and was paid on 26 July 2016. Of this an amount of EUR1.4
million related to shares held by the Group.
13. Related party transactions
a) The Coca-Cola Company
As at 30 June 2017, The Coca-Cola Company and its subsidiaries
(collectively, "TCCC") indirectly owned 23.1% (31 December 2016:
23.2%) of the issued share capital of Coca-Cola HBC. The below
table summarises transactions with The Coca-Cola Company and its
subsidiaries:
Six months ended
30 June 1 July
2017 2016
EUR
EUR million million
------------------------------------------ ------------ ---------
Purchases of concentrate, finished
goods and other items 716.1 705.1
Net contributions received for marketing
and promotional incentives 39.0 45.8
Sales of finished goods and raw
materials 5.6 4.7
Other expenses 1.7 0.2
Other income 2.2 1.4
Other income primarily comprises rent, facility and other items.
As at 30 June 2017, the Group had a total amount of EUR73.6 million
due from TCCC (EUR94.3 million as at 31 December 2016), and had a
total amount of EUR268.5 million due to TCCC (EUR234.6 million as
at 31 December 2016).
During the six months ended 30 June 2017, the remaining
consideration of EUR0.5 million regarding the sale in December 2016
of 50% of the Group's share in its subsidiary Neptuno Vandenys, UAB
to European Refreshments, a subsidiary of TCCC, was collected and
is included in line 'Net receipts from / (payments for) equity
investments' in the consolidated cash flow statement.
b) Frigoglass S.A. ('Frigoglass') and Kar-Tess Holding and AG Leventis (Nigeria) Plc
Frigoglass, a company listed on the Athens Exchange, is a
manufacturer of coolers, cooler parts, glass bottles, crowns and
plastics. Truad Verwaltungs AG, currently indirectly owns 44.4% of
Frigoglass and 50.7% of AG Leventis (Nigeria) Plc and also
indirectly controls Kar Tess Holding, which holds approximately
23.2% (31 December 2016: 23.3%) of Coca-Cola HBC's total issued
capital. Frigoglass has a controlling interest in Frigoglass
Industries Limited and Frigoglass West Africa Ltd., in which
Coca-Cola HBC has a 23.9% effective interest, through its
investment in Nigerian Bottling Company Ltd (NBC).
The below table summarises transactions with Frigoglass,
Kar-Tess Holding and AG Leventis (Nigeria) Plc:
Six months ended
30 June 1 July
2017 2016
EUR
EUR million million
------------------------------------------- ------------ ---------
Purchases of coolers and other equipment,
raw and other materials 75.1 56.7
Maintenance, rent and other expenses 12.8 10.0
As at 30 June 2017, Coca-Cola HBC owed EUR35.8 million (EUR32.0
million as at 31 December 2016) to and was owed EUR0.2 million
(EUR1.0 million as at 31 December 2016) from Frigoglass and its
subsidiaries. As at 30 June 2017, Coca-Cola HBC owed EUR2.4 million
(EUR2.6 million as at 31 December 2016) to AG Leventis (Nigeria)
Plc. Capital commitments with Frigoglass and its subsidiaries as at
30 June 2017, amounted to EUR4.1 million (EUR0.4 million as at 31
December 2016).
After 30 June 2017, Frigoglass Industries Nigeria Limited and
Frigoglass West Africa Ltd, associates in which the Group holds an
effective interest of 23.9% through its subsidiary Nigerian
Bottling Company Ltd, are proposed to become guarantors under the
amended banking facilities and notes to be issued by the Frigoglass
Group, as part of the debt restructuring of the latter. The Group
will have no direct exposure arising from these guarantee
arrangements, but the Group's investment in these associates, which
stood at EUR15.8m as at 30 June 2017 (EUR17.3m as at 1 July 2016),
would be at potential risk if there was a default under the terms
of the amended banking facilities or the notes and the Frigoglass
Group (including the guarantors) were unable to meet their
obligations thereunder.
c) Other related parties
Beverage Partners Worldwide ("BPW")
BPW is a 50/50 joint venture between TCCC and Nestlé. The Group
purchased inventory from BPW of EUR49.8 million during the six
months ended 30 June 2017 (EUR49.4 million in the respective
prior-year period). As at 30 June 2017, the Group owed EUR16.5
million (EUR5.4 million as at 31 December 2016) to, and was owed
EUR12.9 million (EUR14.9 million as at 31 December 2016) by
BPW.
Other
During the six months ended 30 June 2017, the Group incurred
other expenses of EUR11.5 million (EUR11.2 million in the
respective prior-year period). As at 30 June 2017, the Group owed
EUR0.4 million (EUR0.1 million as at 31 December 2016) to, and was
owed EUR0.2 million including loans receivable of EURnil million
(EUR0.1 million as at 31 December 2016 including loans receivable
of EUR0.1 million) by other related parties.
d) Joint ventures
The below table summarises transactions with joint ventures:
Six months ended
30 June 1 July
2017 2016
EUR million EUR million
---------------------------------------- ------------ ------------
Purchases of inventory 14.2 20.5
Sales of finished goods and raw
materials 6.7 5.7
Sales of property, plant and equipment - 2.5
As at 30 June 2017, the Group owed EUR42.0 million including
loans payable of EUR19.1 million (EUR34.0 million as at 31 December
2016 including loans payable of EUR4.1 million) to, and was owed
EUR13.5 million including loans receivable of EUR4.4 million
(EUR11.9 million as at 31 December 2016 including loans receivable
of EUR5.1 million) by joint ventures. During the six months ended
30 June 2017 the Group received dividends of EUR0.6 million (EURnil
in the respective prior-year period) from Brewinvest SA Group of
companies, which are included in line 'Net receipts from /
(payments for) equity investments' of the consolidated cash flow
statement.
e) Directors
There were no transactions between Coca-Cola HBC and the
directors and senior management except for remuneration for both
the six months ended 30 June 2017 and the prior-year period.
There were no other significant transactions with other related
parties for the six months ended 30 June 2017.
14. Contingencies
There have been no significant adverse changes in contingencies
since 31 December 2016 (as described in our 2016 Integrated Annual
Report available on the Coca-Cola HBC's web site:
www.coca-colahellenic.com).
15. Commitments
As at 30 June 2017 the Group, including joint ventures, had
capital commitments of EUR66.2 million (31 December 2016: EUR85.3
million), which mainly relate to plant and machinery equipment.
16. Number of employees
The average number of full-time equivalent employees in the
first half of 2017 was 29,651 (31,627 for the first half of
2016).
17. Subsequent events
There were no subsequent events following 30 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFETTSIAIID
(END) Dow Jones Newswires
August 10, 2017 02:01 ET (06:01 GMT)
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