Coca-Cola Europacific Partners plc

hello and thank you for standing by and welcome to today's coca-cola euro pacific partners q3 trading update 2025 conference call at this time all participants are in a listen-only mode after the speaker's remarks there will be a question and answer session to ask a question during the session you will need to press star 1 and 1 on your telephone i must advise you that this conference call is being recorded today I would now like to hand the conference over to Vice President of Investor Relations and Corporate Strategy, Sarah Willett. Please go ahead, Sarah.

Hello. Thank you all for joining us today. I'm here with Damien Gamble, our CEO and our CFO, Ed Walker. Before we begin with our opening remarks on our third quarter trading update, a reminder of our cautionary statements. This 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 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 remarks will be made by Damien. We will then turn the call over to your questions. And less otherwise stated, metrics presented today will be on a comparable and effect-neutral basis throughout. Year-to-date numbers 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 Cocoa 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 everybody for joining us today. Before I look at Q3 in more detail, I just wanted to take a moment to stand back and reflect on the performance year today. It's been another solid year for CCEP. We are reaffirming our full year guidance, reflecting the strength and resilience of our business. So firstly, I'd just like to do a huge call out to the 41,000 colleagues at CCEP who make this business great every single day. And as always, we continue to be supported by our strongly aligned relationships with our brand partners and our customers. So we've delivered another quarter of volume growth in Europe, despite softer consumer demand, and we continue to drive underlying growth in APS. The NARTD category is profitable and growing, not only up by value, up around 6% this year, but also, and more importantly, by volume. Not a dynamic we're seeing across other FMCG categories. And CCEP are winning, leading the way in creating value for our customers and growing share ahead of the market. Our focus on revenue and margin growth management continues to support solid progression in revenue per unit case, while balancing premiumization with affordability for our consumers. As you know, we've had some challenges this year, which we continue to navigate. These include some one-offs, such as the portfolio changes in Australia and Spain with Suntory and Neste, and also the challenge from softer consumer demand in a number of markets like Germany and Indonesia. Absent the one-off headwinds, revenue today would have been growing at a level more in line with our midterm revenue objectives. So now just touching on market share, our share overall has continued to grow. This reflects consistent share growth in the Philippines and the performance of Monster, which has grown share by just under 200 basis points this year. We have, however, seen pockets of pressure in the home channel in parts of Europe over the past couple of quarters. Our focus remains on driving profitable growth with our customers while ensuring that we continue to prioritize consumer value for money. We've continued to see good progress in away from home, which is not well represented in the needs and share data. In GB, for instance, which is having a standout year, we've had great success in retaining key accounts and winning new business in off and on-premise, across QSO, sandwich and coffee shops, bars, restaurants, and sporting venues, all of which has contributed to growing away from home in terms of share and volumes, which have grown in Europe in every quarter this year. Our efficiency and productivity programs remain firmly on track, delivering slightly earlier than planned. So together with our top-line performance, we are driving strong and profitable cash generation, supporting record investment in future growth, a growing dividend, and ongoing share buybacks. Our great brands, great execution, and great people continue to drive the delivery of our clear and sustainable long-term strategy. So there's much to feel good about today. Turning now to Q3, it's been another solid period with volumes and revenue growing ahead of half one, with volumes up 0.4% and revenue up 3.2%. This has been supported by strong brand performances across the portfolio, driven by great activation, execution, and some good innovation. Coke Zero grew 6.3% in the period, supported by Star Wars collaboration and the kickoff of the new exciting relationship with the English Premier League. We also saw further improvement in Diet Coke, broadly flat, with growth in GB reflecting the continued success of the This is My Taste campaign fronted by actor Jamie Dornan. Overall, Coke trademark volumes were flat, following lower sales of Coke Original Taste. This reflects the Philippines' flooding impact, the increase in the rate of French sugar tax, and some consumer softness, particularly in Germany. In flavour, Fanta has seen new icons of horror campaign with characters including Chucky, Megan and the Grabber adorning bottles and cans in the run-up to Halloween last week. Elsewhere in flavours, Sprite performed well at 4.2%, supported by new QSO listings in France and in GB with new limited edition Green Apple X. Energy has continued its excellent performance driven by Monster. We delivered volume growth of 24% during the quarter and 18% for the year to date. Recent innovation, in particular Lando Norris Ultra, the strongest ever energy launch in Europe, together with the enduring strength of our green and white Ultra Zero, have contributed to this performance. Also supported by our ongoing cooler rollout, which is driving increased distribution. In ready-to-drink tea, although the transition in Iberia from Nest Tea represents a volume headwind this year, great execution from our Spanish colleagues has supported us to head a plan with Fuse Tea strengthening its leadership of the category. The sports category also continues to grow, driven by Aquarius and Surveying also recently introduced Body Armor to our customers in the whole channel with listings and convenience coming from Q4. And finally, we continue to grow our share of the ARTD category. The only alcohol segment currently in growth, up around 8% in value terms this year, Jack Daniels and Coke is the number one ARTD, SKU, and GB in Spain, with Bacardi and Coke and Absolute and Sprite continuing to drive overall share gains. Now quickly, just turning to our performance across the markets. We had a strong start to the quarter in July, as we highlighted in our half-moon results, supported by more favorable weather in Europe. We continued to see the impact of July's flooding in Philippines in August, and across the group, August was more mixed from a consumer's perspective, with that continuing into September. This aside, in Europe, we delivered another solid quarter of volume growth, with volumes of 0.9%, supported by continued growth in away-from-home and a great performance, as I mentioned, in GB. Our revenue was up 3.2%, supported by growth in revenue per case of 2.7%, slightly lower than the previous quarter, reflecting an earlier price increase in GB. Although the NARTD category continues to grow strongly, it remains as competitive as ever, notably in Germany where we've seen a softening in demand as affordability and value for money become increasingly relevant driver for more consumers. It remains as important as ever that we have The right packs at the right price points across all of our channels. We continue to prioritize profitable volume growth, maintaining the optimal balance of promotions across portfolio, but with more focus on mechanics and messaging to visibly emphasize value to our consumers. In GB, for example, two free cans with an eight can multi-pack. In Spain, a four for three on 1.25 liter bottles. Or in Germany, a buy 12, get two free on our one liter crate are all examples of how we continue to offer the right value proposition for our consumers. Our results in APS for Q3 reflect the impact of some of those one-off events, namely flooding in the Philippines, and as we talked about earlier, the exit of our Suntory alcohol distribution in Australia, with distribution in New Zealand due to finish in December. APS volumes for the quarter were down 0.6% with revenue broadly flat. Excluding the Centauri impact, performance in Australia was strong with volumes and revenue in Australia Pacific overall growing mid single digits and high single digits respectively. This is supported by continued strong growth in our Papua New Guinea business. During Q3, we agreed a new multi-year agreement with Bacardi Martini, which from this week sees us start the distribution of the Bacardi portfolio of premium spirits and ready-to-drink brands in Australia, including, of course, Bacardi and Coca-Cola, the latest addition to our ARTD portfolio down under. Q3 volumes in the Philippines were held back by the floods, which also disrupted distribution in August, with September returning to growth. In Indonesia, we've seen the rate of decline ease versus Q2, but volumes continue to reflect a weaker consumer and macroeconomic backdrop. Our transformation of the route to market continues to progress the plan and is expected to complete by the end of this year. This will strengthen our presence and execution in the market, and we will be fit for the future. Touching now on our investments across CCEP to support our long-term growth. During Q3, we opened our largest canning line to date at our site in Queensland, a 65 million euro investment to support the ever-growing demand for Monster, producing 120,000 cans per hour. We also began to build our third aseptic line at our plant in Dunkirk to cater for the growing demand for brands like Powerade and Fuse Tea, while also breaking ground in the Philippines on one of our largest infrastructure investments to date, the new plant in Tarlac, just outside Manila. And our investment in technology saw the introduction to New Zealand of the latest innovation in cold drink equipment, Coke and Go, a new generation of smart coolers which uses AI and image recognition to offer a faster, more convenient experience to our consumers. Delivering $2.3 billion in revenue last year, we're continuing to invest in our B2B portal, MyCCEP, making it even easier for our 260,000 registered customers to do business with us. The portal is now available as a convenient app for customers in Germany, with other markets to follow over the coming months. Revenue through our portal continues to grow ahead of our overall top line. And finally, our SAP rollout of S4 HANA, a key foundation for future top line and productivity gains, is progressing as expected, with the first deployment in Germany running smoothly. I would now like to return to what I said at the beginning. We are reaffirming our full year guidance, which is in line with existing market expectations. We are very pleased to be declaring a second half dividend of €1.25 per share, which together with our first half dividend of 79 cents, maintains an annualized payout ratio of approximately 50%. And the current 1 billion share buyback program will conclude in December. We will provide a further update alongside our full year 2025 results in February. Looking ahead, I'm proud of the strength and resilience of CCP, and I've continued confidence in our ability to deliver. The fundamentals and opportunities for our business are strong, and we operate in the resilient and innovative consumer categories, which are healthy and are growing. We continue to grow our top line, supported by share gains, and we see sequential periods of volume growth in Europe and underlying growth in APS, supported by unmatched capabilities in revenue and margin growth management. While the global macroeconomic environment remains volatile, and we're likely to see challenging consumer conditions persist, we will start to cycle some of this year's headwinds, particularly during the second half as we annualize the Centauri exit in Australia. We're investing more than ever in our key capabilities, accelerating productivity through technology and digital, supported by the strength of our cash generation, which also underpins our ability to sustainably grow returns to our shareholders. We therefore remain very confident that we have the right strategy done sustainably to deliver on our mid-term growth objectives. Again, thank you for your time today. And Ed and I would now be very happy to take your questions. And I'll hand the call back over to you, operator. Thank you.