Coca-Cola Europacific Partners plc

Thank you all for joining us today. I'm here in Manila with Damien Gamal, our CEO, and Nick Gianghiani, our CFO. Before we begin with our opening remarks, a reminder of our cautionary statements. The call will contain forward-looking management comments and other statements reflecting our outlook. These comments should be considered in conjunction with the cautionary language contained today, as well as the detailed cautionary statement found in reports filed with the UK, US, Dutch, and Spanish authorities. A copy of this information is available on our website at www.cocacolaep.com. A pair of remarks will be made by Damien and Nick and accompanied by a slide deck. We will then turn the call over to your questions. Unless otherwise stated, metrics presented today will be on a comparable and FX neutral basis throughout. Following the call, a full transcript will be made available as soon as possible on our website. I will now turn the call over to our CEO, Damien.

Thank you, Sarah, and good morning, good afternoon, and good evening, everybody from Manila, and thank you for joining us today. Before we get into the detail of today's announcements, I just wanted to take a moment to stand back and reflect. We continue to execute our clear strategy. We have an unwavering commitment to stakeholder value creation. Our retail customers continue to share in our success since 2017, and we've created more value for them than any of our peers. And indeed, our TSR speaks for itself. We've had a fantastic first half, driving an impressive upgrade to full-year guidance, supported by unparalleled in-market execution. Further geographic diversification is reinforced today with our proposed and exciting acquisition of Coca-Cola Beverages Philippines, which will also support our transformation journey in Indonesia. We're also clear on the strategic choices we make, from simplifying our portfolio to driving a more efficient business while investing for the long term, and always aligned with the Coca-Cola company and all our brand partners. So now to the agenda. Let's start with our strong first half. Before I begin, I would like to take this opportunity to thank all of my great colleagues at CCP for the hard work, commitment, and dedication to our customers and to our business. I am very pleased with our financial performance. achieving double-digit top and bottom line growth, value share gains, and impressive free cash flow generation. Top line growth was price mix led, but importantly, also supported by solid volume growth. In addition, we grew transactions ahead of volume in Europe, Australia, and New Zealand. This collectively has enabled us to raise our full year guidance today, which Nick will cover in more detail shortly. And we have continued to invest in the business for growth across our portfolio, digital, supply chain, sustainability, and of course, in our highly engaged people. We are focused on great people, great service, great beverages, all done sustainably for a better shared future. And I will touch on each of these areas as we take a brief look back at the first half. Starting with great people whose wellbeing and safety continues to be our number one priority at CCEP. I'm extremely pleased that even more of our colleagues participated in our Global Engagement Survey this year. We achieved an excellent score, positioning us comfortably ahead of our industry benchmark group, and we continue to be externally recognized as being a great place to work. We are committed to building an even more inclusive and diverse culture. We celebrated a number of key events across our business, including Pride, International Women's Day, and we support the Special Olympics with our colleagues from the Coca-Cola company. Great service will always be a key priority at CCEP as we strive to make it even easier for our customer to do business with us. We continue to invest in our supply chain, like the new state-of-the-art can lines we recently installed in Australia and Norway, and a new PT line in Iceland. Our journey to be the world's most digitized bottlers continues as we invest in our broader digital capabilities. In fact, Our B2B portal, myccp.com, celebrated its fifth birthday last week, and through ongoing investment, we are on track to have over 200,000 customers generating an impressive 2 billion euros of revenue through the platform in Europe alone. Most importantly, our customers continue to share and support our success. As we once again created more value in the retail channel for our customers within FMCG in Europe, and within any RTD in Australia and New Zealand and our peers. Activation, both in-store and online, is key to our success. We've kicked off some great plans for the summer, and we have some really exciting plans for the FIFA Women's World Cup, Halloween, and, of course, Christmas to come. And finally, our great beverages. We are extremely privileged to make, move, and sell some of the world's most loved brands, we continue to invest and innovate to make them even better and to appeal to even more consumers. In fact, in Europe, over 75% of households purchased from our NART portfolio up 50 basis points versus last year. Coca-Cola Zero Sugar continues to be a great example of successful innovation, achieving good share and volume growth across all key markets with volume of 5.5% in the first half as consumer trends for low and no calorie beverages continue. In energy, Monster continue to gain share through innovation with even more flavors in the juice and ultra ranges and supported by some great celebrity collaborations. We also expanded our footprint in the alcoholic ready to drink category with an encouraging start for Jack and Coke. So now moving on to two strategic choices we've made on our beverage portfolio. and our partnerships as we strive to further simplify to grow our business profitably. We believe these choices are right for the long-term success of our business, enabling a greater focus on our priority categories. In this vein, in Australia and New Zealand, we will maximize our extensive knowledge in the ARTD category by launching new scalable offerings aligned with the Coca-Cola company. The category is highly attractive, and one in which we are well positioned for a great future, having recently become the market leader with over 16 years experience. It is, of course, complementary to our core business from a manufacturing, sales and distribution perspective. In this context, our partnership with Beam Suntory will come to an end in the second half of 2025. And in Europe, our partnership with Capri Sun will come to an end during the full year 24. As you see here, neither of these choices will have a significant impact to CCEP. Importantly, we continue to make great progress on our sustainability journey. We remain focused on our packaging commitments and reaching our ultimate goal of using 100% recycled or renewable plastic in Europe and API. We recently introduced 100% recycled PET bottles in Indonesia. And in Australia, New Zealand, and Indonesia, we moved Sprite to clear bottles, making them easier to recycle, so now in line with our European markets. We continue to invest in sustainability-focused technology through our CCEP ventures, and we are proud to be part of the recently announced Coca-Cola Systems Sustainable Venture. And importantly, we continue to be recognized externally, so all in all, great progress for the first half. I'd like to turn now to our first half performance highlights. As I mentioned earlier, we are very pleased with our top line performance. Solid underlying demand in our developed markets, the continued recovery of the away from home channel in the first quarter, and resilient trading in the home channel helped drive volume growth of 1%. I am particularly pleased with the volume growth in Europe in light of the headline pricing demonstrating consumers' love for our brands. Execution of our dynamic pricing strategies across our markets drove solid revenue per case growth of 10%. Our headline pricing remains ahead of pre-pandemic levels, but below realized cost inflation reflected in our margins as we continue to prioritize relevance and affordability. We gained value share both in-store and online within NARTD. And we also continue to win with our customers remaining focused on delivering fantastic activation and making it even easier to do business with us. Our continued focus on efficiency as we close out our full year 21 to 23 programs together with strong top line growth, strong operating profit growth of 13%. This supported impressive free cash flow generation of 850 million euros. And as I said just now, we have today upgraded our full-year guidance. I'd now like to hand over to Nick to talk in more detail to the financials. Nick?

Thank you, Damien, and thank you all for joining us today. Let me start by taking you through our financial summary. So we delivered total revenue of €9 billion, an increase of 10.5%, which I'll come back to shortly, while our cost of sales per unit case increased by 9%. As communicated previously, we anticipated the cost of sales per unit case increase to be weighted more towards the first half, given the comparables from last year. We delivered comparable operating profit of 1.2 billion euros, up 13%. This reflects our strong top line performance, as well as the benefits of our continued focus on efficiencies and discretionary spend. All in this resulted in comparable diluted earnings per share of 1 euro and 85 cents, up 17 percent. Free cash flow generation continues to be a core priority, and we delivered an impressive 850 million euros during the first half. And finally, on shareholder returns, we paid a first half interim dividend per share of 67 euro cents, which we declared in the first quarter and paid out in May. As a reminder, this was calculated as 40 percent of the full-year 2022 dividend. So, if you now turn to our revenue highlights, as we anticipated, the strong growth in our top line was driven by an increase in revenue per unit case and good underlying volume demand in our developed markets, with overall reported volumes up 1 percent despite lapping strong comparables. And of course, our strategic portfolio alignment choices primarily in Indonesia, but also the exit of bulk water and frozen in Australia. In Europe, trading momentum continued in the away from home channel with volumes up 4% in the first half, lapping 38% growth last year. And very importantly, this is up 2.5% versus 2019 levels. The home channel continued to remain resilient, growing 1.5% lapping strong growth of 4% last year for the same period. While all markets were in volume growth, France outperformed, delivering high single-digit volume growth, and Germany delivered mid single-digit volume growth. In API, very good trading momentum in Australia and New Zealand was offset by Indonesia, with volume down 5.5%. As I explained, the SKU rationalization was the main driver of this And including these one-off volumes in API would have been down 1.5%. More importantly, when you both look at Australia and New Zealand, and you back out some of these choices in Australia, Australia was up 3% on a volume basis, and New Zealand and the Pacific Islands were up 3.5%. So as Damien said, we're really pleased with the underlying strong volume momentum despite what we continue to have to manage through in terms of the pricing environment. In Indonesia, we did see some solid and encouraging growth in our affordable packs. Softer consumer spending in Indonesia as a result of the macro softness we referred to in our Q1 trading update is really what contributed. Moving to the revenue per unit case, which grew by 10% in the first half, this reflects positive headline price. continued focus on promotional optimization and revenue growth management initiatives. Encouragingly, we continue to be relevant to our consumers and shoppers and continue to leverage our broad pack price architecture that we have continued to develop over the years. Revenue by segment is also referred to here with more detailed commentary by geography in the release. Now to our upgraded guidance for full year 2023, which reflects our current view of market conditions. Starting with the top line, we now anticipate our revenue growth of 8 to 9 percent, an increase from 6 to 8 percent, driven by solid underlying demand in first half and the implementation of our price increases. As per our previous guidance, top line growth will be mainly price max led, but as I said, the volume performance supporting that has been very impressive. We do have Germany and Netherlands due to be implemented in the third quarter in terms of pricing, but that combined with the annualized impact of last year's second round of pricing, we would expect some moderation in our revenue per case in the second half. Promotional efficiency, of course, remains a top priority for us. Our consumer-centric approach has a clear focus on maintaining affordability and relevance. For example, in France, we have already committed to an additional three months of promotional activity on Coke Zero Sugar and continue to look at opportunities across other markets as well. As always, we continue to manage the business for the longer term with the overall realized pricing still tracking below inflation as reflected in our margins. Clearly, we remain focused on improving our margins over the midterms. The NARPD category has remained resilient to date, demonstrated by the value growth in all of our markets. And with our ongoing investment and innovation in our great brands, we believe we can at least maintain or grow our share in this robust category. We continue to see a dynamic external environment, with consumers increasingly being cost-conscious. With this in mind, we continue to leverage our recommended price-back architecture to address different consumer needs across the spectrum of affordability and premiumization. From a cost perspective, we now expect commodity inflation of around 8 percent, previously 10 percent, driven by lower gas and power and recycled plastic pricing. We are now over 95 percent hedged on our commodity exposure for this financial year. We still anticipate an increase of around 8% on our COGS per unit case. While we will benefit from slightly more favorable commodity pricing, this will be offset by upward pressure through the concentrate line as a result of strong revenue per case and strong mix, as well as the geographic mix. As a reminder, concentrate accounts for approximately 45% of our cost of goods. And as we look out further, we continue to build cover, and we are now over 65% hedged for 2024 and around 30% hedged for 2025. We will update, of course, more in due course. Given our improved top-line outlook and our continued focus on OPEX management, we will now look to deliver operating profit growth of 12% to 13% and increase from 6% to 7%. From a phasing perspective, we now anticipate operating profit growth to be more evenly phased across the first and second halves of the year. Our updated guidance today implies that we expect to improve our full-year operating margins by 40 to 50 basis points, a focus area for us, as I said earlier. Please note that these growth rates continue to be provided on an FX-neutral basis, and whilst it is too early to provide finite FX guidance for modeling purposes, we continue to expect to see a translational headwind of approximately 200 basis points for the year based on current rates. As for our previous guidance, we anticipated an upward trend on our effective tax rate driven by the known tax rate increases, such as the recent UK tax rate increase. We now expect our full year comparable ETR to be around 24%, implying a higher ETR in the second half. This is primarily due to the timing of the UK statutory rate increase, which only came into effect April of this year. And of course, as well, lower reversals of unrealized tax positions. And finally, we now expect to deliver free cash flow of at least 1.7 billion euros, increased from around 1.6 billion euros. With that, I'm going to hand back to Damien to talk about the transactions.