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11 February 2021
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11 February 2021

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UK and European Coke bottler Coca-Cola European Partners has reported an 11% drop in annual sales as its away from home volumes have plunged by more than a quarter due to the impact of the coronavirus.

Full year revenues were down 11.5% to €10.6bn, down by 11% on an fx neutral basis.

Comparable volumes were down 10% across the year, driven by the impact of the COVID-19 pandemic and some customer disruption as a result of its planned pricing strategy (resolved in August), albeit partially offset by growth in Monster & Coca-Cola Zero Sugar

The primarily driver of this drop was adverse away from home, which plunged 27.5% reflecting outlet closures and restrictive measures.

This drop was partially offset by modest 1.5% growth in the home channel, supported by strong 44% growth in online grocery.

Immediate consumption volumes fell 24.5%, significantly impacted in both AFH & home channels reflecting lower consumer mobility. Future consumption volumes were down outperformed 2%.

Revenue per unit case eased back 1.5% during the period, with positive momentum in Q1 (+1.5%) & Q3 (+1.0%) offset by Q2 (-5.0%) & Q4 (-3.5%), reflecting the varying extent of restrictions during the year.

Overall for the year, GB revenues were down 8.5% to €2.2bn, France down 10% to €1.7bn, Germany down 6.5% to €2.3bn, Iberia down 22% to €2.1bn and Northern Europe down 9.5% to €2.3bn.

In the fourth quarter comparable volumes were down 9.5% as renewed restrictive measures came into place at the end of 2020.

An even more stark 32% decline in away from home volumes reflected the increase of restrictive measures and outlet closures, while home volumes were up 4% helped by by solid Christmas execution.

Comparable operating profit plunged 28.5%, with reported operating profit down 47.5% to €813 from €1.2bn.

Cost of sales per unit case rose 2.5%, reflecting the under-recovery of fixed manufacturing costs given lower volumes and adverse mix.

CEO Damian Gammell commented: “2020 was a challenging year like no other, and I am very proud of how well we have managed through such a rapidly changing environment. That is down to the extraordinary work and commitment of our colleagues, supporting each other as well as our customers and communities, and to all of whom, I am sincerely grateful.

“The crisis also reinforced the power of our relationship with The Coca-Cola Company and our other brand partners. Our collective belief in continuing to invest in our core brands has served us well, gaining share both in the home channel and online. We also took meaningful actions to protect our performance, ending the year with strong free cash flow and a solid balance sheet.

“While our business continues to face significant restrictions, which we confidently continue to navigate, the crisis has strengthened our determination to move further and faster towards a stronger and even more sustainable future. We protected the short-term without compromising the longer-term by continuing to invest, particularly in digital, sustainability and our portfolio. These investments enabled us to provide exceptional service and support for our customers and colleagues, to progress faster towards our 2040 net zero carbon ambition and to seed future revenue streams like Costa, Tropico and Topo Chico.”

“So, we are confident about the future, built upon three pillars: great people, great service and great beverages. We are making a difference and believe we have the right foundation, alongside the exciting Coca-Cola Amatil acquisition, to drive sustainable growth and deliver increased shareholder value.”

Morning update

Eastern European Coke bottler Coca-Cola HBC limited the damage from the coronavirus crisis to a 4.6% drop in full year volumes in 2020.

Q4 like-for-like volumes fell by 0.7% compared to the prior-year period, which it called “a resilient performance in the face of renewed lockdown restrictions in our markets and a strong comparatives”.

Volume performance was better in the second half, benefiting from continued growth in the at-home channel. Reported volume declined by 5.7% in 2020, but that was also impacted by the deconsolidation of our Russian Juice business (Multon).

FX-neutral revenue per case declined by 4.1%. The largest driver of the decline was weaker package mix as a result of lower volumes in the out-of-home channel which carries more single-serve package formats with a relatively higher revenue per case.

Channel mix was also negative, driven by the lower volumes from the out-of-home channel.

However, category mix was positive, benefiting from better performance in sparkling and energy compared to stills, with pricing also positive in the year.

In the full year, FX-neutral revenue declined by 8.5% on a like-for-like basis, adjusted for disposals.

Without these adjustments FX-neutral revenue declined by 9.6%.

Group reported revenue declined by 12.7% to €6.1bn, a larger decline than FX-neutral revenue, mainly due to the weakening of the Russian Rouble.

CCH said that from the start of the COVID-19 pandemic it moved quickly to put in place strategies which could drive single-serve package formats. Increased activation of multi-packs of cans and glass bottles which earn a higher revenue per case than larger packages drove a 12.9% growth of single-serve multipacks in the at-home channel in Q4, an acceleration of the 4.7% growth in Q3.

By category, sparkling volumes grew by 0.2% and energy volumes grew by 17.9% driven by growth in its Monster brand.

However, water volumes fell by 19.7%, juice volumes by 7.9% and ready-to-drink tea by 20.2%. Its premium spirits business volumes also declined by 11.1% due to its out-of-home exposure.

Gross profit margins improved by 20 basis points to 37.9% due to “careful management of input costs and timely hedging”.

Comparable EBIT fell by 11.4% to €672.3 million taking comparable EBIT margins up 20 basis points to 11.0%. CCH said this “strong performance” reflected “decisive action taken on discretionary costs early in the crisis” allowing it to deliver targeted cost savings of €120m in 2020.

CEO Zoran Bogdanovic commented: “The numbers we released today demonstrate how far our business has come in building both operational agility and lasting margin resilience. I am proud of the speed, flexibility and care with which our people responded to the pandemic and the results we have achieved. I am also thankful to our customers and suppliers for their valuable partnerships which are even more critical in these challenging times.

“The improved second-half trading was driven by a return to growth in the at-home and greater resilience in the out-of-home, despite a resurgence of infections in many of our markets towards the end of the year. Partnering closely with The Coca-Cola Company team on rigorous prioritisation of our joint market investments, coupled with our rapid adaptation of the route-to-market and excellent execution, resulted in strong value share gains in both Non-alcoholic ready-to-drink and Sparkling across the majority of our markets.

“While the economic outlook remains uncertain, we are clear on the opportunity and direction for our business and are investing to strengthen our capabilities which will drive our long-term performance, underpinned by further advances on sustainability. Looking to 2021, we will continue adapting fast in a dynamic market and partnering with our customers to drive a strong recovery in FX-neutral revenues, along with a small increase in EBIT margin. We move forward with confidence and resolve to continue adapting to win.”

French spirits group Pernod Ricard has posted an 8.9% drop in first half revenues to €5bn, though this translates to an organic decline of a more modest 3.9% drop when factoring currency movements and the strength of the Euro.

Although first half sales declined, the second quarter showed an improvement, the company said, with sales down 2.4% organically compared to a 5.6% drop in Q1.

Notably its Americas business was up 2% despite the collapse of travel retail, with the US up 5%.

Asia-RoW was down 6% as double-digit growth in China (+13%), Turkey, Korea and Pacific, and return to growth in India in Q2: was undone by Covid-related declines in certain Asian markets and travel retail

Europe was down 5% as continued very strong growth in Germany, UK, Russia and Poland was more than offset by Covid impact in Spain, France, Ireland and travel retail.

Sales excluding travel retail grew by 1% overall in the period.

Strategic international brands, including Martell and Scotch, declined by 6% due to travel retail and on-trade exposure but specialty brands performed very strongly, up 22%.

First half profit from recurring operations declined -2.4% organically, with an organic margin improvement of 51bps, thanks to dynamic management of resources and favourable phasing.

Gross margin contracted 108bps, driven by soft pricing, adverse mix primarily linked to decline in travel retail and higher cost of goods.

Chairman and CEO Alexandre Ricard commented: “We are particularly encouraged by our Must-win domestic markets returning to growth in H1 FY21. The first half confirms the long-term sustainability and underlying strength of our business.

“Despite an uncertain and volatile environment, with disruption in the On-trade and a prolonged downturn in Travel Retail, we anticipate organic Sales growth for full-year FY21, thanks in particular to our dynamic performance in domestic Must-win markets USA, China and India.

“We will continue to implement our strategy, in particular accelerating our digital transformation, while dynamically managing resources. Thanks to our solid fundamentals, our teams and our brand portfolio, I am confident that Pernod Ricard will emerge from this crisis stronger.”

Pub group Marston’s has announced that suitor Platinum Equity Advisors will not make an offer for the company – the news of the PE group’s approach had sent Marston’s shares soaring.

Marston’s said it continues to believe it is “well placed to benefit from the opportunities in a post-COVID 19 trading environment, following the completion of the SA Brain transaction and harnessing factors such as a reduction in on-trade industry supply, and increased home-working that will benefit pubs in suburban locations”.

Marston’s noted it has a strengthened balance sheet following the creation of the joint venture with Carlsberg and significant cash headroom, enabling it to continue to absorb the impact of the temporary government restrictions.

It stated: “We welcome the continued nationwide rollout of the vaccine programme and look forward to rebuilding trading momentum once restrictions are lifted.”

On the markets this morning, the FTSE 100 is up 0.4% to 6,547.9pts.

Risers include Coca-Cola HBC, up 4.3% after this morning’s announcement, Naked Wines, up 3.8% to 758p and Just Eat Takeaway.com, up 2.6% to 7,815.3p.

Marston’s is down 8.7% on this morning’s news to 90.8p, with other fallers including SSP Group, down 4.3% to 303.5p, Marks & Spencer, down 1.5% to 129.4p and WH Smith, down 1.2% to 1,613p.

Yesterday in the City

The FTSE 100 edged down 0.1% yesterday to 6,524.4pts.

On a day of little UK company reporting, major fallers include Ocado, which dropped a further 7% yesterday back to 2,511p after warning extra costs related to COVID and international expansion would continue to hit its profits in 2021.

Other fallers included out of home specialists SSP Group, down 5.1% to 317p, Compass Group down 4.8% to 1,398p, C&C Group, down 4.6% to 239p and WH Smith, down 2.9% to 1,633p.

Other fallers included Pets at Home, down 2.8% to 406.4p, Glanbia, down 2.7% to €9.88 and Ocado partner Marks & Spencer, down 2.5% to 131.4p.

The day’s risers included Nichols, up 3.1% to 1,250p, Greencore, up 2.3% to 130p, FeverTree, up 2.2% to 2,475p, DS Smith, up 2.1% to 370.4p, Imperial Brands, up 1.5% to 1,491p and Britvic, up 1.4% to 793p.

In Amsterdam, Heineken fell back 5.1% to €84.50 after announcing it is to shed 8,000 jobs due to the coronavirus’ impact on its sales.

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