Coca-Cola HBC profits fall as exit from Russia will cost bottler £161m, but shares rise on expectations of sharp second-half growth
- Swiss group reveals first-half net profit down 34.4%
- All production and sale of Coca-Cola brands in Russia has been stopped
- HBC increased net income from sales in emerging markets by more than a third
Coca-Cola HBC’s profits fell by about a third after the decision to drastically scale back its operations in Russia.
The London-listed group showed first-half net profit fell 34.4 percent to 152.9 million euros, even as overall sales beat forecasts amid rising prices and stronger demand in emerging markets.
The anchor bottling company took a €190m (£161m) impairment charge in the first six months of the year, mainly due to its Russian business, and expects a further €82m in the second half.
Profits: Switzerland-based Coca-Cola HBC showed first-half net profit fell 34.4 percent to 152.9 million euros, even as overall sales beat forecasts
All production and sales of the Coca-Cola Company’s brands in Russia were halted due to its full-scale invasion of Ukraine, resulting in a significant drop in trade in both countries.
HBC said last week that going forward it will be a much leaner company in Russia, selling local soft drink brands such as Dobry, Rich and Moya semiya.
Despite the financial fallout from the war in Ukraine, the FTSE 100 firm still managed to grow its net sales in emerging markets by more than a third, or 14.2 percent on an organic basis.
He attributed the expansion to higher prices, the strengthening of the Russian ruble and the Nigerian naira, and the acquisition of a majority stake in the Cola Bottling Company of Egypt.
The group’s emerging and steel markets also performed well thanks to increases in both volumes and prices, with revenues in Poland, Hungary and the Czech Republic rising by at least a fifth.
Demand for HBC’s carbonated and still products rose only marginally, but strong trading at Costa Coffee outlets, many of which were forced to close temporarily last year, helped volumes in the coffee division grow by more than 50 per cent.
Meanwhile, the firm’s energy drinks, which include Monster Energy and Predator, rose 18.6 percent following double-digit percentage growth in territories as diverse as Nigeria, Italy and Greece.
Commenting on the company’s results, HBC CEO Zoran Bogdanovic noted: “I am pleased that we have achieved strong organic growth, balanced between volume and profit per case.
“Pricing, mix and cost efficiencies helped mitigate the increase in resource costs, underpinning the successful translation of revenue growth into earnings and cash flow.”
The company renewed its full-year guidance, expecting comparable operating profit of 740 million to 820 million euros this year, ahead of market forecasts.
Shares of Coca-Cola HBC were 2.9% higher at 20.38 in afternoon trading on Thursday, although their value has fallen by about a quarter over the past 12 months.