Coca-Cola HBC AG

Good morning and thank you all for joining the call. In a moment, Zoran will share his highlights of 2023. Ben will then take you through our financial performance in more detail and discuss the outlook for 2024 before handing back to Zoran, who will look in more detail at the growth opportunities for the business before we open up the floor to questions. We have just over an hour available for the call today and we should have well over 30 minutes for questions. We will ask you, therefore, to keep to one question and one follow-up question before joining the queue again. Let me remind you that this conference call contains forward-looking statements, and these should be considered in conjunction with the cautionary statements in our results statement issued earlier today. With that, now let me hand you over the call to Zorin.

Thank you, John. Good morning, everyone, and thank you for joining the call. 2023 was a strong year for Coca-Cola HVC with significant strategic and operational progress. It's a privilege and pleasure to be the voice for a committed team who have worked tirelessly to sustain our track record of growth, delivering record levels of revenue, profit, and earnings. My two key takeaways for you today are simple. Our growth strategy is working, and our portfolio, operations, and teams keep getting stronger and stronger. On almost all metrics, we look at and review our growth strategies delivering great results. Our NIRTD and sparkling drinks markets are growing despite adverse economic headwinds in most markets. This is happening because we are working with our partners to drive consumer activation and drive per capita consumption. More on this later. Within this, Our market share continues to grow with an additional 110 basis points of NARTD and 80 basis points share over the last 12 months. And we have delivered this while improving price and mix, maintaining affordability and improving our NPS scores with our customers. As well as delivering results today, we have invested for future growth. Firstly, invested in our portfolios. strengthening our three priority categories led by Sparkling, working through our powerful partnership, particularly with the Coacola company, to drive innovation and consumer activation, as well as making selective acquisitions like the acquisition of Finlandia. Secondly, investing in our bespoke capabilities through targeted CapEx and building stronger teams by leveraging the benefits of our Dolphin and Oxygen programs, we discussed at our investor day in May, redesigning and simplifying the organization and processes for growth. And thirdly, invested in sustainability, investing in long-term programs that make a meaningful difference to our impact on the environment and the communities in which we operate. Our operational progress is driving strong financial results. our organic revenue growth of 16.9% was very strong, with solid volume performances from our strategic priority categories and good price mix improvements. Volume leverage and good cost management helped deliver nearly 18% organic growth in EBIT and a record high comparable EBIT. As a result of the strong organic growth, our EBIT margin grew 50 basis points on a reported basis to 10.6%. a much stronger outcome than we had anticipated earlier in the year. We also delivered a record free cash flow of $712 million, which helped reduce net debt to $1.6 billion. This enabled us to increase our returns to shareholders and initiate $400 million two-year share buyback program, demonstrating our confidence in future growth and consistent with our capital allocation priorities. Overall, The combination of improved profitability and strong capital discipline helped improve return on invested capital by over 230 basis points to 16.4%, a strong performance. Ben will take you through the drivers of this in more detail. Before I hand over to him, let me share some commercial highlights, starting with our category results. Sparkling continues to be our main growth engine, representing around 70% of our portfolio. Sparkling volumes grew by 2.5% overall, with growth accelerating in the second half of the year. Trademark Coke grew volumes, led by high single-digit growth in emerging markets. Coke Zero grew across all segments. Sprite also grew well, with a particularly good performance in developing markets. Adult sparkling benefited from the relaunch of Kinley, helping deliver mid-single-digit growth in established markets. Turning to energy, volumes grew by nearly 30%. Growth was strong in each segment, but particularly emerging with the continued success of Predator in Nigeria and successful launches in Egypt of Monster and Fury. This was the eighth consecutive year of strong double-digit growth. Volume growth in coffee was also very strong, up over 30%. We continue to make good progress on out-of-home customer recruitment, adding 5,000 outlets in the year. Our segmentation strategy with Costa and Café Vergnano is working very well. I would also call out a very strong performance from sport drinks and premium spirits. Turning briefly to our segments, we have delivered consistent strong revenue and EBIT performance from all three segments. In particular, established and developing delivered good improvements in EBIT margins, even as we continue to invest in long-term growth. As I said at our Capital Markets Day last year, we are very confident in our strategy, and now, as we see in these four-year results, it is evident that we are on the right track, driving growth and creating value for our customers, consumers, and shareholders. Let me now hand you over to Ben, who will talk more about our 2023 performance before I return to discuss our medium-term growth ambitions.

Thank you, Zoran, and good morning, everyone. In 2023, our organic revenue growth was 16.9%, a very strong performance given continued cost inflation and the global macroeconomic and geopolitical challenges. Against this backdrop, achieving volume growth of 1.7% across the business was a very positive result and with encouraging trend in the fourth quarter, where we saw volumes up 6.8%. Revenue per case grew 15%. Of these, pricing continued to be the largest contributor, accounting for the majority. Package and category mix were also accretive, with continued improvements to our single-serve mix. 2023's revenue performance followed 14.2% organic revenue growth in 2022 and over 20% in 2021. 2023 comparable EBIT was 1,084,000,000 euros, exceeding 1 billion euros for the first time in our history. On an organic basis, comparable EBIT grew 17.7% in the year. Major contributors to these results were a good conversion of our revenue growth management initiatives together with effective actions on input cost inflation, albeit partially offset by transactional FX impacts. In addition, we deliver modest improvement to operating costs as percentage of revenue. While we continue to invest in the business in pursuit of our vision of being the leading 24-7 beverage partner, our cost management actions contributed to an 80 basis point improvement to gross margin, and a 50 basis points improvement to comparable EBIT margin. On an organic basis, our comparable EBIT margin improved by 10 basis points. On a reported basis, our average comparable EBIT growth is more than 10% since 2019, showing our sustained long-term focus on increasing the financial fitness of this business and creating shareholder value. Let's now look at the drivers of performance by segment. To keep it simple, I'm going to discuss these figures on an organic basis, as you can see on the slides. In the established segment, revenues grew by 12.3%. Revenue per case was up 15.1%, driven by price increases weighted to the first half. Positive category and package mix also helped. We continued to focus on single-serve activation, resulting in a 320 basis point improvement in single-serve mix. Established market volume declined by 2.4%, reflecting tough comparatives, particularly in the middle of the year, but with an improving trend towards the end of the year. Sparkling volumes were slightly lower versus prior year, largely reflecting comparable growth of over 9% in 2022. Within sparkling, Coke Zero and adult sparkling delivered good mid-single-digit growth. Energy volumes expanded by mid-teens, despite very tough comparatives, with good growth in monster. Coffee also grew strongly up mid-20s, despite lapping strong growth in 2022. Fills declined by high single digits driven by the water category, especially impacting Italy, where we made conscious choices to prioritize profitable revenue growth. In terms of countries, I'll call out Greece, delivering a good performance in sparkling with high single-digit growth driven by Coke Zero, Fanta, and adult sparkling. Results were held by a prolonged three seasons. Ireland and Switzerland also grew volumes in the year. As we've previously said, improving margins while investing in growth has been a key priority for some of our established markets, particularly Italy. I am therefore very pleased the established segment improved comparable EBIT margins by 100 basis points. Turning to the developing segment, revenues were up over 18%. Revenue per case increased by 20.2%, driven by pricing initiatives and positive category impact mix. As I highlighted this time last year, we are focused on growing the share of multipacks of single serve. We're now reaping the benefits of this with a positive contribution from package mix for the segment as a whole. Volumes were down 1.7%, but with an improving trend. The full-year performance largely reflects cycling very strong growth in 2022. Across the categories, volume trends were broadly consistent. In sparkling, Coke Zero delivered good growth, and trademark Coke was slightly negative, a good outcome, given the very strong comparative and underlying market conditions. Monster also delivered mid-teens growth. Coffee grew strongly throughout the year. In terms of country performance, Alcoa of Poland, where volumes increased by 1.5%, despite lapping high 2022 comparatives. Barkley grew low single digits, led by double-digit growth in Coke Zero and Sprite, and an encouraging performance from Coke Zero Sugar Zero Caffeine launched in 2023. Like Italy, we made deliberate choices to focus on profitable growth in water at the expense of volume with good success. Developing segment-comparable EBIT grew 26.9%, with operational leverage and cost control more than offsetting input cost inflation. This is a testament to the hard work of our colleagues through excellent execution. In the emerging segment, revenue grew by almost 20%, driven by both volume and good price mix. Revenue per case increased 15%, reflecting proactive actions to manage the impact of currency devaluation and cost inflation. Emerging markets volume grew 4.3%. Partly volumes were up mid-single digits with good growth in Nigeria, Ukraine, and Egypt. The energy volume grew strong double digits, and we were very satisfied with the successful launch of our position in the category in Egypt. Fuel volumes were broadly unchanged year on year, despite the substantial price increases in water in Egypt during half one. In terms of country performance, I'm particularly pleased with the volume growth improvements delivered in Nigeria. Our results demonstrate the depth of expertise and strength of our team in the country as they achieve strong market share gains while tackling the impact of significant currency devaluation. Comparable EBIT grew by 11.7%, and comparable EBIT margin was down 80 basis points organically, reflecting the net effect from currency headings. Moving further down the P&L, I'm delighted to report that comparable EPS grew 21.8%. This was supported by strong profit delivery and effective management of financial costs, capturing the spread between our largely fixed cost of borrowing and the benefit of rising interest rates on our cash deposits. As expected, our comparable tax rate of 27% was at the top end of our guided range. Consistent growth in comparable EPS lead us to recommend a dividend of 93 euro cents, up 19% from 2022, in line with the long-term payout ambitions of our dividend policy. CapEx increased by 85 million in 2023 to 675 million. Looking at some specific investments during the year, we expanded manufacturing capacity, adding seven lines, two of those in the high-growth energy category. We also increased our footprint of energy-efficient coolers, now over 54% of our fleet, to help support broader market presence and drive single-serve growth. And we invested in our sustainability goals, including our pet production and packaging solutions, as Zoram mentioned, and he will expand on that shortly. CAPEX finished at 6.6% of revenue, at the lower end of our target range, largely reflecting the strong top-line growth. Free cash flow increased by 67 million year-on-year to 712 million, another record high, driven mainly by profit. Our balance sheet remains very strong. At the close of the year, net debt to EBITDA was 1.1 times, even after completing the Finlandia deal in November. Our priorities for capital allocation are very clear. To be the leading 24-7 beverage partner, we make thoughtful choices, ensuring that we deploy capital efficiently and effectively in service of profitable growth. For example, we continue to invest in acquisitions that further improve our portfolio or our capabilities, particularly around strengthening our route to market for customers and consumers. Finlandia was a good example of a targeted portfolio enhancement. and we remain open to seizing the right opportunities as they come up. Our capital discipline has also allowed us to drive higher returns to shareholders. In November, we launched a 400 million share buyback program, reflecting the board's long-term confidence in our business performance, the prudent financial management of our balance sheet, and our commitment to return capital to shareholders responsibly. To date, we have returned $42.6 million through share buyback. Taken together, I'm pleased to see not only increased shareholder returns with strong growing dividends while maintaining a high level of investment in the business, but also record-roaring performance, even as we manage through another challenging year. This gives me great confidence in the future. All in all, we delivered a strong upturn in 2023, well ahead of our initial expectations for every year. As a result, it represents an even better platform for which we can build the future and deliver our medium-term growth targets. 2024 will be an important year on that journey, and we expect another good performance. At this early stage, we expect group organic revenue growth to be within our target range of 6% to 7%. On a comparable basis, cost per unit case should increase low to mid-single digits. We continue to face transactional FX headwinds, particularly after the latest evaluation of the NIRA, but the Cox line will also benefit from translational effects. Taken together, organic EBIT growth should range between 3% and 9%. Before I hand you back to Zora, let me just say how much I have enjoyed my time here at Coca-Cola HPC. It's been an honor to be the CFO of such a dynamic, high-growth business. I know I leave the company in a very strong position, and I wish Zoran and the rest of the team many years of future success. Thank you. And with that, over to Zoran.