Coca‑Cola HBC AG, a leading bottler of The Coca‑Cola Company, reports its financial results for the full year ended 31 December 2018.
Coca-Cola forecasts a full-year profit well below Wall Street expectations on Thursday as it reported a quarterly decline in volumes in North America, sending its shares down by three per cent. The company’s financial statements, which were released to the London Stock Exchange on Thursday, showed that Coke raised prices of its beverages at the expense of falling demand.
Second year of FX-neutral revenue growth above the 4-5% target range, with continued good progress towards 2020 margin targets Net sales revenue up 6.0% on an FX-neutral basis; reported net sales revenue increased by 2.1% FX-neutral revenue per case up 1.7% benefiting from revenue growth management initiatives including product innovation, price increases and better package mix.
Volume growth accelerated to 4.2%, with growth in all segments, driven by Sparkling beverages. Nigeria volume decline in a very competitive environment growth in all categories including RTD Tea, which returned to growth after the launch of FUZE Tea. Established and Developing segment countries improved price/mix at a higher rate than in 2017. Emerging segment price/mix growth, up 2.4%, was a moderation from prior years due to the cycling of 2016/17 price increases in Nigeria and lower Premium Spirits sales in Russia.
Zoran Bogdanovic, Chief Executive Officer of Coca‑Cola HBC AG: “In 2018 we delivered another very good performance with revenue growth above our target range and another step up in margins. Strong volume growth in all our segments was helped by a record number of new product launches, whilst price/mix improved for the eighth consecutive year. This growth supported margin progress, which we delivered while increasing our investment in marketing. Our sharp focus on cost efficiencies continues while we invest in the business for growth. The shape of the business, capabilities and commitment of our people and our overall commercial proposition give us confidence in our ability to continue to grow revenues and margins.”
Sparkling beverage volume grew 4.3% in the year, the highest pace of growth in a decade. The company saw growth in all of its countries except for Italy and Nigeria. Growth was led by the low- and no-calorie variants which grew 25.9%. Coke Zero growth gained pace in 2018, with growth exceeding 20% for the seventh consecutive quarter, and are encouraged to see very strong growth rates from Fanta Zero and Sprite Zero. Adult Sparkling continues to do well with growth from all brands contributing to a 6% volume growth for the category.
The weakening of the Russian Rouble, Nigerian Naira and to a lesser extent, Swiss Franc accounts for the difference between this and revenue growth on an FX-neutral basis.
Juice volume grew marginally, up 0.3% in the full year. Volume growth was 0.5% in the Emerging segment, as growth from Nigeria, Romania and Bulgaria was partially offset by declines in Russia where Coca-Cola focused on premium brands in a competitive market. Juice grew 4.4% in the Developing segment, mainly driven by
Poland and declined by 5.2% in the Established segment, mainly driven by Ireland, where the decision to discontinue distribution of dilutes in Juice drinks continues to impact volumes negatively.
In Nigeria, continued intense competition and price increases were taken in October resulted in weak volumes for the fourth quarter, turning volume performance from a small growth in the first nine months to a decline of 1.9% for the full year. Water, Juice and Energy delivered positive results offset by Sparkling. FX-neutral revenue, which is a reflection of the value currently pursued in Nigeria, was up by 5.0%. Having made further changes to the price/pack architecture, the company saw encouraging results from the business in December.
In Nigeria, Coca -Cola cycled the significant pricing taken in 2016/17 and also had to adjust the price and pack architecture in the business to respond to intense competition. In Russia, the discontinuation of distribution of the Brown-Forman products played a significant role due to the very high revenue per case Premium Spirits command. Excluding this impact, Emerging market FX-neutral net sales revenue per unit case increased by 5.0%.
Overall, Coca-Cola expect volume to continue to grow in all three segments, with the Established and Emerging market segments accelerating marginally, as Nigeria returns to volume growth, and Developing markets moderating to more normalised levels.
The Group continues to monitor the situation in Nigeria in order to ensure that timely actions and initiatives are undertaken to minimise potential adverse impact on its performance, particularly in relation to potential currency volatility. During 2018 revenue from the operations in Nigeria amounted to 7% of consolidated net sales revenue; as at 31 December 2018 non-current assets of operations in Nigeria amounted to 11% of the consolidated non-current assets.
