Coca-Cola Europacific Partners plc

Thank you all for joining us today. I'm here with Damian Gamill, our CEO, and Ed Walker, our CFO. Before we begin with our opening remarks, a reminder of our cautionary statements. This call will contain forward-looking management comments and other statements respecting our outlook. These comments should be considered in conjunction with the cautionary language contained in today's release, as well as the detailed cautionary statements 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. Prepared from remarks made by Damian and Ed, 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. They will also be presented on an adjusted comparable basis, thus reflecting the results of CCP and our Australia, Pacific and Southeast Asia Business Unit, APS, as if the Coca-Cola Philippines transaction had occurred at the beginning of last year rather than in February when the acquisition completed. 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, Damian.

Thank you, Sarah, and many thanks to everyone joining us today. Before I begin, I would particularly like to take this opportunity to thank all of my great colleagues at CCEP for their ongoing hard work and dedication to our customers and to our business. I'd also like to take the opportunity to thank Nick and wish him all the best, and of course, to welcome Ed into his new and very well-deserved role. Before we get into the detail of our half-year results, I just wanted to take a moment to stand back and reflect. At CCEP, we have a clear strategy which we continue to focus on and execute very well. We have an unwavering commitment to stakeholder value creation. Indeed, our TSR speaks for itself. And importantly, our retail customers continue to share in our success. Since 2017, we've created more value for them than any of our peers. We are now a bigger and a more diverse business, providing the opportunity to leverage best practice and talent across all of our markets. Importantly, we continue to take decisions for the long term, as demonstrated through our geographic diversification, our portfolio choices, our investment strategy, which I'll touch more on later. So now to our first half. I'm very pleased with our financial performance, achieving solid top and bottom line growth and strong free cash flow. The great performance of our APS business unit helped offset software volumes in Europe, driven by strategic listings and some adverse weather. This demonstrates how our diversity makes us a stronger, more robust business with about a third of our volumes now delivered by our APS business unit. We grew share ahead of the market, and importantly, continue to create significant value for our customers. Today, we reaffirm our full year guidance, which is in line with our midterm objectives, and looking ahead, we feel we are very well placed. We continue to invest for growth and have strong commercial plans in place for the rest of the year and beyond to engage our customers and our consumers. We remain focused on driving profitable revenue growth and growing category value over the long term for our customers. This alongside our focus on productivity and free cash flow. Combined with our first half interim dividend, this demonstrates the strength of our business and our continued ability to create value for all our stakeholders. Now, turning to our key performance highlights. As I said just now, we delivered a solid top line performance. Our volume growth reflects good underlying demand across our developed markets and double-digit growth in Southeast Asia driven by the Philippines. It also reflects strategic choices we've made in our portfolio in Europe and the adverse weather I talked to earlier, especially in June. Execution of our revenue and margin growth management initiatives along with our dynamic price and promotion strategies drove solid revenue per unit case growth. We enjoy a broad pack offering, which enables us to balance affordability and premiumization. So we continue to invest accordingly to prioritize relevance and affordability for all our consumers, whilst remaining focused on winning with our customers every day. Now to the NARTD category. It remains resilient, continuing to grow in value in Europe and APS, and we gain value share both in-store and online, supported by great activation and execution. Our strong top-line performance, together with our continued focus on efficiency, drove solid operating profit growth of 9%, with operating profit margins excluding the Philippines now back to 2019 levels, a great achievement given the wider backdrop. We generated solid free cash flow, supporting the return to our target leverage range of 2.5 to 3 times by the end of this year, providing even more flexibility as we look forward. And as proven successful integrators, we seamlessly completed the Philippines integration. At CCEP, we remain focused on great people, great brands, great execution, all done sustainably. So I will touch on each of these areas as we take a brief look back at the first half. Starting with great people whose well-being and safety continues to be our number one priority at CCEP. We are committed to building an even more inclusive and diverse culture So we celebrated a number of key events across our business, including Pride and International Women's Day, and we supported the Special Olympics with our colleagues from the Coca-Cola Company. Our commitment to our people continued to be recognized externally in 2024 by the Top Employers Institute in Europe. And moving further east, over 9,000 talented Philippine colleagues are now firmly part of the CCEP family, alongside expanding our reach to a further 1 million customers. 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 appeal to even more consumers. In fact, in Europe, around 75% of households purchase from our NARTD portfolio. Coca-Cola trademark volumes perform well, up 1.7%. Coca-Cola Zero Sugar continued to achieve good share and volume growth across our key markets. We delivered fantastic activation with the Euros and joined forces with Marvel in Australia with limited edition superhero cans. Coca-Cola original taste also performed well, led by growth in the Philippines and supported by the launch of our lemon flavor extension in Europe, now available in both regular and zero variants. Sprite volumes performed well, up 5.9%. in growth across Europe and APS, with double-digit growth in the Philippines, driven by execution, reformulation, and refreshed marketing. Our sports volumes grew 4.8% despite cycling's strong growth last year, led by Powerade, and supported by the launch of Powerade Mango and Great Euros Activation. Aquarius also grew, reflecting continued favorable trends in this category. Monster Outperforms. driving overall energy volume up 7.5% on top of an impressive 15% growth last year. Fantastic innovation continues to drive recruitment and distribution, building on the launch of Monster Green Zero, the launch of Rainstorm, and the continued flavor extensions across the ultra range. And finally, in ARTD, as we diversify our business to address different need states, And following the encouraging results of Jack Daniels and Coca-Cola, the number one AR2D value brand in GB, we are building on the excitement with the launch of Absolute and Sprite in Europe, already off to a good start with an encouraging rate of sale. Great execution will always be a key priority for us at CCEP, as we strive to make it even easier for our customers to do business with us and share in our success. We continue to create value for our category, adding 600 million euros of value to our retail customers in the first half. Activation, both in-store and online, is key. We continue to invest in our digital capabilities to drive more targeted activation points in the market. Through our world-class key account management capabilities, we continue to increase distribution, building incremental displays, and increasing our share of cold drink space with more cooler placements. Both help our brands reach more households and improve our retail and away from home share of visible imagery metrics, as you will see here. We also continue to invest in supply chain. One example in Germany, we invested 40 million euros in a new returnable glass line. Great for our customers while supporting our sustainability agenda. Which brings me on to our other sustainability highlights for which we continue to be recognized externally. including retaining our inclusion on the CDP's A-list for climate and maintaining our MSCI AAA ESG rating. We continue to invest in sustainability-focused technology through our CCEP Ventures arm. We recently created a sustainability partnership with AirHive, which supports the development of technology to capture 1,000 tons of CO2 annually. This can then be used in our carbonated drinks while aligning with our net zero emissions. emission targets. And to support sustainability in everyday decision-making, we recently launched our own sustainability academy in partnership with the AXA Climate School. I'd now like to hand over to Ed to talk in more details to the financials.

Ed? Thank you, Damien, and thank you all for joining us today. Let me start by taking you to our financial summary. We delivered total revenue of €10.1 billion, an increase of 3.5% in the half. Our cost of sales per unit case increased 2.5%. This is cycling a high single-digit cost of sales per unit case growth in the first half last year and also includes the mixed benefit driven by the strong growth in the Philippines, which has a lower cost of sales per unit case, as you know. We delivered an operating profit of €1.3 billion, up 9%. This reflects our solid top-line performance the delivery of the first year of our next efficiency program, and our continued focus on strong cost management. This has led to an operating profit margin expansion of more than 50 basis points, and as Damien referred to earlier, gets our operating margin back to 2019 pre-Philippines levels, which we're very pleased with. We delivered comparable diluted earnings per share of €1.97 in the half, up 7% on a comparable and FX neutral basis. This is not an adjusted measure, so does not assume that the Philippines transaction had occurred at the beginning of last year, but in February this year when the acquisition completed. The growth in EPS is driven by our solid operating profit growth, in part offset by Aboitus' non-controlling interest of 17 million euros, a higher interest charge driven by the Philippines transaction, and a higher effective tax rate, all of which were highlighted earlier this year within our full-year guidance. Comparable free cash flow generation continues to be a core priority, and we delivered an impressive 539 million euros in the first half. This was after investing in various key projects, including new can lines in GB in Australia, a new PET line in Papua New Guinea, and a new RGB line in Germany. We stepped up our cooler placements also, as Damian referred to earlier. And we continue to invest in our digital journey, including our move from legacy SAP systems to S4 HANA. We remain on track to deliver comparable free cash flow of around 1.7 billion euros for the year as per our guidance. And finally, on shareholder returns, we paid a first half interim dividend per share of 74 euro cents, which we declared back in April and then paid in May. As a reminder, this was calculated as 40% of the full year 2023 dividend. Now to our revenue highlights. We delivered a solid top line performance. Revenue per case grew 2.9% reflecting positive headline pricing, promotional optimization, and brand mix, partly offset by geographic mix. This geographical mix was driven by the strong growth in the Philippines, which is at the lower revenue per unit case as we've discussed before. We continue to benefit from the thing we took in the second half of last year in GB in Germany and successfully executed pricing across our other key markets. Australia Pacific revenue per unit case grew in line with Europe. Volumes. Volumes were up 0.6% versus last year. As Damien touched on earlier, our volumes reflect strategic choices we have made in our portfolio and adverse weather in Europe, especially in June. As you'll recall, we've made a number of portfolio choices, including our transition out of Capri Sun in Europe and out of bulk water across a number of markets. These are the right strategic decisions as we continue to be more choiceful on where we want to play for the long term and to ensure we continue to grow our business both profitably and sustainably. These exits account for around 1% of volume in the first half across both Europe and APS. In Europe, these strategic exits and the adverse weather, especially in June, impacted both home and away from home channels. The exits aside, we believe that the adverse weather, whilst not an exact science, did drive the majority of the remaining volume decline. Underlying consumer spending did hold up reasonably well, and we saw volume growth across a number of our brands, like sports and energy, as Damien talked to earlier. We continue to focus on driving long-term value for the category and for our customers. Our retail share held up well, improving across the half, and we grew sharing away from home despite lower footfall across the channel. Looking at our APS markets, we saw volumes grow by 7.5% in the first half, reflecting solid momentum in Australia and New Zealand, double-digit growth in the Philippines, and a solid performance from Papua New Guinea. From a brand perspective, we delivered solid growth in Coke Zero and Fanta and double-digit growth in energy. In Indonesia, following an encouraging first quarter, we have seen more mixed demand reflecting the geopolitical situation. We do, however, remain confident in our transformation plan and the long-term opportunity in the market. Damien will touch more on this shortly alongside the Philippines. Thanks, Ed.