Coca-Cola HBC AG

Good morning. Thank you for joining the call. In a moment, Zoran will share his highlights of the first half of the year before Anastasis takes you through our financial performance in more detail and discusses the outlook for the balance of 2024. And finally, Zoran will return for a strategic overview before we open up to questions. We have just over an hour available for the call today, which should leave around 30 minutes for questions. We will therefore ask you to keep to one question and one follow-up before joining the queue again. Let me remind you that this conference call contains various forward-looking statements and that these should be considered in conjunction with the cautionary statements in our slide pack and in our results statement issued today. Now let me turn the call over to Zoran.

Thank you, Joanna. Good morning, everyone, and thank you for joining the call. I'm very pleased with our progress in the first half of 2024. We continue to execute our strategy, delivering strong performance in a mixed market environment and continuing to invest in our portfolio and capabilities. As always, the key to our continued success are our committed, passionate, and engaged people who have remained incredibly adaptive and resilient. Also, a very big thanks to our customers, the Coca-Cola Company, Monster Energy, and all our other partners for their trust and collaboration in jointly driving sustainable growth. I'd like to call out three things that stand out for me for this period. First, the strong and high quality organic revenue growth we've delivered with volume growth of 3.1%. Growth was led by the three prioritized categories across our 24-7 portfolio, sparkling energy and coffee. and we are gaining share with NARTD up 170 basis points and Sparkling up 80 basis points year-to-date. Second, the resilient EBIT performance even while navigating challenging environments in several markets, and we'll discuss that in more detail in the coming slides. And third, the ongoing investment we are making in our 24-7 portfolio and BISPO capabilities in support of our growth strategy. The numbers we reported today show our growth strategy is working. Organic revenue is up 13.6% in first half, with organic volumes up 3.1%. We have delivered continued top-line momentum, building on a strong start in Q1 with an acceleration of volumes in the second quarter. At the same time, we have continued to grow EBIT. Organic EBIT grew by 7.5%. and that is on top of tough comparatives in 2023. During the first half, we achieved strong performance despite significant FX weaknesses in two markets, Nigeria and Egypt. These headwinds contributed to a lower comparable EBIT margin by 30 basis points. Currency movements are a reality of some of our markets, and we have the tools and techniques to manage them in the best possible way. As we've said before, emerging markets offer tremendous growth opportunities and we are investing to unlock them. Sparkling remains the most important engine of our growth for our company and has performed well this half with organic volume of almost 1% against a strong competitive and with value share up 80 basis points. Once again, we have worked closely with a Coca-Cola company to develop our summer plans. The focus has been capitalizing on a summer of sport with targeted marketing campaigns during Euro 24 and in preparation for the Olympics. In Austria, we ran a consumer promotion to win tickets to the Euro for our biggest customers. And you can see here the players on the one-litre multipacks. we activated the entire sparkling drinks portfolio in Poland by offering consumers the chance to win tickets to Paris 2024. We are also building the connection between our portfolio and our consumers' favorite music and festivals. For example, the wristbands promotion shown here, which gives consumers fast access passes and only Coke can do special experiences. Adult sparkling continues to be a positive contributor to volume and revenue per case expansion, and we've benefited from several innovations in Schweppes and Kinley, including alcohol replacement offers such as Blueberry Mojito in Romania, or strengthening our zeros proposition in tonics with new launches and campaigns. And we launched 3 cents in a further 9 markets over the period, targeting the cocktail occasion in the super premium segment. Energy continues to perform very well, even with tough comparatives. Our segmented portfolio in energy allows us to target the offering to different markets, demographics, and affordability needs. We have seen strong performances from Predator and Fury, and emerging market-focused affordable offers, as well as from Burn, our premium brand. Monster also continues to do well, with particularly strong results in Egypt. and we launched Monster Energy Green Zero Sugar in 16 markets, opening up another area of growth for the brand. Coffee volumes grew 21.6%, and we continued to focus on out-of-home customer recruitment, adding 1,500 new outlets in the period. Costa had a solid start to the year, growing in out-of-home, while Cafe Vergnano delivered another strong performance with volumes up by 56%. Still volumes grew by 5.2%. I am particularly pleased to see the strong recovery in volume growth for water. We took the decision in 23 to drive more value in the category through targeted brand positioning as well as package and price adjustments in several of our markets. Following the initial expected volume decline, we are again seeing growth with first half volumes up high single digits. We are focusing this growth on a profitable sub-segment, accelerating single serves for the at-home occasion and the out-of-home channel. In sports drinks, we delivered strong mid-teams growth. Powerade campaigns have been targeted around the Olympics and we are significantly increasing sales distribution and activation. Premium spirits volumes grew by 17.3% with a particularly good performance in the developing segment. We took over the distribution of Finlandia Vodka in 19 markets, enhancing our premium spirits credentials and opening up incremental mixability opportunities for our NARTD portfolio. I am particularly excited about Poland and Czech where Finlandia has a great presence and where we weren't distributing before we acquired the business. And as we continue growing sales, it's important that we grow in a sustainable way and continually strive to increase collection of the packaging we put on the market. For that reason, packaging circularity remains at the top of our agenda. Deposit return schemes, or DRS, are one way to ensure both high packaging collection rates and supply of feedstock for recycling. DRS went live in Hungary and Ireland in January and February respectively this year, with promising starts in both countries. In Ireland, for example, around 335 million beverage containers have been collected since the 1st of February, with daily returns reaching 3.2 million on average in July. We are encouraged by the positive results in the first eight months of DRS operation in Romania. And in June alone, over half the plastic bottles placed in the market were returned for recycling. In general, we are finding that the transitions to DRS are progressing in line with plans and customers and consumers are responding positively. I'm pleased to share that in July, we were awarded $130 million loan by the EBRD to finance CAPEX and working capital requirements in Egypt. This loan recognizes our long-term commitment to Egypt and also our sustainability credentials in this market. The loan will also support our ongoing investment in people and in developing sustainability solutions. For example, continuing to fund our Youth Empowered and She Leads programs and continuing to invest in our energy-efficient coolers and sustainable packaging innovations. Let me now hand over to Anastasis to take you through the financial results in more detail. Thank you, Zoran, and good morning, everyone.

In the first half, we achieved strong organic revenue growth, up 13.6%, with an acceleration in quarter two versus quarter one. The quality of this revenue remains high, with 3.1% organic volume growth in half one, and with volume growing organically in all three segments in quarter two. Organic revenue per case increased by 10.2%, keeping pace with quarter one. Overall, pricing remained the most important driver of revenue per case as we took actions to mitigate ongoing inflation, currency devaluation, and changes to regulation and taxation in specific markets. We also saw the impact of value over pricing from the prior year. Mix was also positive. with continued improvement in single-serve mix, which expanded 130 basis points in the first half. It is worth highlighting that while revenue per case expansion was similar in quarter one and quarter two, this was driven by an acceleration in the emerging segment in quarter two, as we continue to take actions to manage the currency devaluations in Nigeria and Egypt. Half one EBIT grew 7.5% on an organic basis, driven by strong performances from both the established and developing segments. As Zohra mentioned, we have managed currency devaluations in Nigeria and Egypt during the first half of 2024, and I'm really proud that the business was able to navigate the impact and produce another year-on-year expansion in comparable limits, both on an organic and a reported basis, and even on a short-term basis within months of the devaluations. Now, let's go through the drivers. Comparable gross profit expanded by 6%. We benefited from reduced COX pressure compared to what we have recently seen in the business. This was as a result of some easing of the rate of inflation of our key commodities, as well as foreign currency translation benefits from costs denominated in emerging market currencies. This easing COX pressure, combined with a strong revenue growth, allowed us to deliver a 100 basis point expansion in gross profit margin. Moving on to OPEX, we have seen comparable operating costs expand by 8.7% in the first half of the year, another result, an increase in OPEX as a percentage of revenue. The main driver of this has been currency weakness in the emerging segment, which has resulted in a mark-to-market adjustment on balance sheet items with a negative impact on the P&L in the emerging segment. Aside from this impact, we have also continued to invest ahead of the curve in the opportunities we see for our 24-7 portfolio. In half one, we expanded our sales force, in particular focusing on the out-of-home, as well as invested in premium spirits and coffee. Overall comparable EBIT margin declined 30 basis points versus 2023, and down 60 basis points on an organic basis, driven by the higher OPEX. Coca-Cola Hellenic has a strong track record of improving OPEX as a percentage of revenue. And we fully expect to return to improving this metric as a key driver of the margin expansion that we target for our medium-term guidance. Now, moving to the segments, established markets revenue grew 4.4%, driven by price mix. We are still seeing the positive impact of carryover pricing from 2023, as well as some additional pricing taking in the first half of the year. Quarter two price mix saw an anticipated decline relative to quarter one. This has been driven by cycling a very strong expansion in Q2 2023, as well as negative country mix driven in part by the strong growth from Greece and relatively weaker performance from Switzerland. We also saw strong performance in water compared to flat sparkling volumes, which drove negative category mix. On the other hand, we continue to benefit from actions to drive positive package mix, expanding single-serve mix by 120 basis points in the first half of the year. Volumes were steady in the first half, with a pleasing return to growth in quarter two as an easier comparative. Overall, sparking was down slightly, although our continued focus on zeros delivered good growth on a top comparative. Energy was up high single digits, And I'm pleased to report that Stills grew too, with sport drinks growing high single digits. The established segments saw organic EBIT growth of 11.1% and 70 basis points expansion in comparable EBIT margin. This was driven by good leverage from top-line growth, as well as lower inflation in Cox per unit case. Revenue in the developing segment grew by 11.5%, with volumes up 3.1%. Revenue per case increased by 8.1%, benefiting from carryover pricing, ongoing pricing during the period, and also improved category mix. Sparkling and energy were the main contributors to volume growth. We are also encouraged to see growth in our premium offerings in the market, in particular Powerade, and also Kinley, which has benefited from the brand relaunch. Comparable EBIT grew substantially by 62.3%, with comparable EBIT margins up 310 basis points. benefiting from good leverage from top-line growth, as well as lower inflation in COPs per unit case. Revenues in the emerging segment grew by 22.7%, and price mix was positive at 17.6%, mainly driven by pricing to manage the impacts from currency devaluation, and also benefited from positive category and package mix. Volumes were robust, growing 4.3%. Sparkling continues to be the growth engine in the emerging segment, and both stills and energy also contributed positively. In Nigeria, volume grew double digits as we continued to execute well in a challenging macroeconomic environment. In Egypt, we saw good recovery of volume in sparkling in quarter two, as well as ongoing strength in energy throughout the period. In Water in Egypt, a strategic decision to focus on profitable growth has been successful, and the category grew following the reset last year. It is our execution and deep knowledge of emerging markets that sets us apart at times like this, and we are immensely proud of our team's hard work and commitment to delivering a highly dynamic environment. Moving further down the P&L, we can see a slight decline in comparable earnings per share in the first half to deliver one euro and four cents per share. Finance costs were higher year on year, mainly related to foreign currency. We expect second half finance costs to be lower on the first half. We have adjusted our finance cost guidance to the range of 60 to 75 million euro. And as expected, our comparable tax rate of 27% was at the top end of our guided range. Moving to the balance sheet, the first graph show a year-on-year decline in CAPEX in line with our planned phasing. We still expect CAPEX as a percentage of sales to be within our guidance rates of 6.5% to 7.5% by year-end. We generated precast low of €220 million, a decline year-on-year due to the phasing of networking capital. Our balance sheet remains very strong with net debt to EBITDA below our guided range of 1.5 to 2 times. We continue to return cash to shareholders, paying 93 euro cents dividend in June, an increase of 19% versus prior year payments. And we have also returned over 160 million to shareholders throughout our share buyback since its start. Now, let me say a few words on the outlook before passing back to Zoran. While we're mindful of the challenging macroeconomic and geopolitical backdrop, including a more uncertain consumer environment, we are upgrading guidance for 2024. This reflects a strong first half performance and high confidence in our bespoke capabilities, our 24-7 portfolio, and the potential across a diversified country footprint. We now expect organic revenue growth of 8% to 12% and organic EBIT growth in the range of 7% to 12%. We have not changed our guidance on COGS per case, which is still for a low to mid-single-digit expansion. Thank you with that, and back to Zoran.