LONDON (Alliance News) - Coca-Cola HBC AG, the world's second largest bottler of Coca-Cola products, cited a "challenging", volatile year ahead, having reported a drop in 2014 profit due to adverse currency movements and volume weakness in key emerging markets Russia and Ukraine.
The coke bottler reported an 11.4% drop in fourth quarter comparable net profit to EUR30.4 million, from EUR34.3 million last year. Total group sales volume increased 0.8% in the quarter to 485.1 million unit cases, following a 4.8% decline in the third quarter, and 3.9% in the first nine months of the year, after it saw a somewhat better performance in Russia, Nigeria, Poland, Austria and Greece.
It said volume returned to growth in the quarter in its developing markets, such as Poland, Hungary and Czech Republic, after nearly two years of decline.
"In the fourth quarter, sharp depreciation of currencies in some of our biggest markets and the worsening macroeconomic outlook due to the decline in the oil price added to the challenges we faced this year," the company said in a statement.
Net sales revenue declined by 4.1% in the quarter and 5.3% in 2014 as a whole, ending the year at EUR6.51 billion. Volume declined 2.8% to 2.00 billion unit cases in 2014.
Coca-Cola HBC posted a comparable net profit of EUR277.4 million for 2014, down 5.4% on the year before.
In line with its progressive dividend policy, the company proposed a full-year dividend of EUR0.36 per share, up from EUR0.354 in 2013.
The company said it was hit by adverse currency movements and subdued volumes throughout the year amid political unrest in Russia, Ukraine and Greece, as well as weak demand in Romania. However, the group had managed to partly offset the currency hit and weak volumes with price increases and lower input costs, helped by the drop in oil prices.
"Positive pricing and favourable input costs were not enough to offset the adverse impact of currency movements, which reached EUR100 million in the full year, volume decline and the concentrate cost increase," the company said.
The company cited a "challenging" year ahead. It said its expects volumes to stabilise in certain markets, including its business in Nigeria, but said Russia and Ukraine are expected to continue to face continued difficult trading conditions.
"In 2015, we will continue to pursue our strategy with a wide range of planned actions, from improving volumes through marketing initiatives and focusing on affordability to our proven self-help efficiency measures," said Chief Executive Dimitris Lois in the company's statement.
"These efforts, along with materially reduced input costs, will help to mitigate the negative impacts of currency volatility, and related uncertainty in some key markets. We anticipate a challenging year and are optimistic that our business will prove its strengths in adversity," Lois added.
The company operates in 28 countries, but generates its biggest profit and revenue from emerging market countries. However, it is seeing its biggest volume declines from these.
Coca-Cola HBC said it generated free cash flow of EUR332.7 million in 2014, EUR80 million lower than in 2013.
"Its exposure to troubled markets like Russia, as well as the fact it is essentially a Greek firm listed in London, is not making it particularly attractive to investors. Despite an attempt to rally into these numbers over the last week, the share price still languishes close to its all-time London listed low," Lewis Sturdy, a dealer at London Capital Group PLC, said of Coca-Cola HBC after the results announcement.
Last week, Coca-Cola HBC, alongside other stocks exposed to Russia, got a much welcome boost after leaders at peace talks in Belarus agreed a ceasefire for Ukraine, which has since proved fragile.
Coca-Cola HBC shares were down 3.7% at 1,136.00 pence mid-morning Wednesday, the worst performing stock in the FTSE 100.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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Coca-Cola HBC (CCH)