Coca Cola HBC, one of the leading bottlers of The Coca-Cola Co (NYSE:KO), said its first half performance was boosted by the warm weather in its established markets in June as well as the late Easter holiday.
Revenues ahead of expectations
The FTSE 100-listed group, which bottles and sells Coca-Cola drinks in over 25 countries, said operating profits soared by 20.8% to €266.4mln in the six months ended 30 June (H1 2016: €220.6mln).
That came on higher sales revenues, which jumped 5.6% to €3.21bn (H1 2016: €3.04bn); ahead of analysts’ expectations of 5% growth in the period.
Revenue growth accelerated during the second quarter which bodes well for the rest of the year, Coca Cola HBC said.
The company expects to record growth across most of its markets in its full-year results, although it added that growth is likely to “moderate” slightly in the second half.
The impact of currency movements on full-year earnings is now expected to be neutral, compared with previous guidance of a €15mln negative hit to operating profits.
‘On track for full year revenue and margin growth’
"We are delighted to report an excellent set of results for the first half of the year, with volume and revenue per case growth in all three market segments,” said chief executive Dimitris Lois.
“It is also very pleasing to see the revenue growth translating into significant margin expansion. This demonstrates that our strategy to exploit our lean asset base and improve profitability through operating leverage is powerful and delivers well.
He added: “We are on track for broad-based revenue and margin growth for the full year with the organisation energised by the progress we are making towards our 2020 financial targets.”
Strong overall performance but still a hold, says Shore Capital analyst Phil Carroll.
“The performance in the second quarter has strengthened further, partly as a result of Easter in a number of markets, but nevertheless, profit delivery for the period is up strongly and comfortably ahead of market expectations,” he said.
“Overall, [it was] a strong performance by CCH despite a tough second quarter in Nigeria and the significant debt provision in Croatia.
“The restructuring of the business in combination with a return to volume growth is now driving solid operational leverage with the EBIT margin for the period up 150bps to 9.1% so the group on track for its target of 11% by 2020.”
Carroll expects more upgrades to estimates later this year but kept his recommendation at ‘hold’, noting the “unpredictability” of the Coca Cola HBC’s performance as one factor that weighs on his investment view.
Shares added 8.85% to £25.83 in afternoon trading.
--Updates for broker comment and share price--