LONDON (Alliance News) - Coca-Cola HBC AG Thursday reported a rise in profit in the first half of its financial year as it benefited from growth in volumes and margins, although its revenue was hit by adverse foreign exchange rates.
Shares in Coca-Cola HBC were trading up 8.7% at 1,438.00 pence, the best performer in the FTSE 100 late Thursday morning.
The FTSE 100 soft drinks bottling company reported a pretax profit in the six months ended July 3 of EUR164.7 million, up from the EUR129.2 million profit it made in the same period the year before, although revenue did slip to EUR3.15 billion from EUR3.18 billion.
Coca-Cola HBC said that underlying volume growth gained momentum in the second quarter, leading to a 3.8% rise in the first half, an improvement on the 3.4% decline it suffered in the first half of the prior year. The half year also benefited from four extra selling days in the first quarter, which added 2.5% to volume across the business, it said.
All countries in the developing segment contributed to a 6.2% rise in volume for that market, following a 6.6% decline in the first half of the year before, while a strong performance in Nigeria, Romania and Ukraine more than offset a weakness in Russia, lifting emerging market volume by 5.4%, having made a 1.7% fall the prior year. Volume in the established market declined 0.2%, it said, although this was an improvement on the 4.2% decline in the year before.
The company said it expects the developing and emerging markets to continue to grow faster than the established markets.
However, Coca-Cola HBC added that revenue slipped slightly as adverse foreign exchange rates more than offset the volume gains. Net sales revenue grew 0.7% in the established markets and 4.7% in the developing markets, but declined 4.5% in the emerging markets.
It said that it expects to take a hit of EUR155 million on earnings before interest and tax for the full year due to currency headwinds.
Coca-Cola HBC's gross profit margin increased to 36.5% from 35.8% which it said was down to favourable input costs which fell per unit case by high single digits, while its Ebit margin grew by 120 basis points to 6.3% from 5.2%.
"We are pleased to have achieved strong results, with good volume growth and a significant improvement in margins. Our strategic initiatives are delivering, both through our commercial strategy designed to drive growth and ongoing efficiency improvements," Chief Executive Dimitris Lois said in a statement.
"Difficult conditions remain in many of our markets, particularly in Russia, although we have proven to be adaptable and resilient in such markets. Conditions are more favourable in Eastern Europe and Nigeria, where we are confident of further growth. We have become more optimistic as the year has progressed and remain confident that 2015 will be a year of volume growth and progress on margins," he added.
Shore Capital said that Coca-Cola HBC's results were "surprisingly strong", given the substantial currency headwinds. "Overall, a surprisingly strong set of results from Coca-Cola, albeit with the benefit of easy comparables," said analyst Phil Carroll.
"It would seem that volume momentum is returning to the business, which along with the benefit of low input costs should enable improving results going forward," Carroll added.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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Coca-Cola HBC (CCH)