Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong organic revenue growth of 13.6% in the first half of 2024.
- Volume growth of 3.1%, led by prioritized categories such as Sparkling, Energy, and Coffee.
- Resilient EBIT performance with organic EBIT growth of 7.5%.
- Continued investment in the 24/7 portfolio and bespoke capabilities.
- Successful execution in emerging markets like Nigeria and Egypt despite significant FX weaknesses.
Negative Points
- Comparable EBIT margin declined by 30 basis points due to FX weaknesses in Nigeria and Egypt.
- Increased OpEx as a percentage of revenue by 130 basis points, driven by currency weaknesses.
- Consumer sensitivity to pricing in some markets, including Italy, Switzerland, and Austria.
- Impact of business disruption due to a fire in the Bambi plant, potentially affecting EBIT by up to 200 basis points.
- Higher finance costs year-on-year, mainly related to foreign currency.
Q & A Highlights
Q: Can you provide more context around the volume improvement and the sharp price mix normalization in the Established segment? Have there been any material changes with the consumer over the last few months?
A: In the Established segment, we are pleased with the volume growth in Q2, driven by strong performances in Greece, Italy, and Switzerland. This was achieved through mindful adjustments in our pricing and promotional strategies. We have seen some consumer sensitivity to pricing in certain markets, but overall, the segment is performing well. (Zoran Bogdanovic, CEO)
Q: Can you help us understand the mark-to-market FX impact on EBIT in the Emerging segment? Is it non-cash or cash, and what would group organic EBIT have been excluding this impact?
A: The mark-to-market FX impact on EBIT in the Emerging segment is primarily non-cash, related to the remeasurement of balance sheet items, particularly an intercompany loan in Egypt. This impact accounts for about half of the 130 basis points increase in OpEx as a percentage of revenue. Excluding this impact, the group organic EBIT growth would have been higher. (Anastasis Stamoulis, CFO)
Q: Can you provide specifics on the scale of the mark-to-market FX impact in the first half and the positive margin development in the Developing segment?
A: The mark-to-market FX impact accounts for about half of the 130 basis points increase in OpEx as a percentage of revenue. In the Developing segment, we saw strong organic revenue growth of 11.5%, driven by good operating leverage and lower inflation in input costs. This segment also benefited from strategic investments in sales force and local warehouse capacity. (Anastasis Stamoulis, CFO)
Q: What are the key drivers behind the wide range in your EBIT guidance for the second half?
A: The wide range in EBIT guidance reflects the dynamic macroeconomic and geopolitical environment, including potential consumer sensitivity to pricing, further currency devaluations, and geopolitical risks. The lower end of the range accounts for these uncertainties, while the higher end assumes stronger market momentum and improvements in currency conditions. (Anastasis Stamoulis, CFO)
Q: Can you elaborate on the strong volume growth in Egypt in Q2 and the current market environment there?
A: Egypt saw strong double-digit volume growth in Q2, driven by effective execution of commercial strategies and strong performance in Sparkling, Energy, and Water categories. Despite ongoing currency devaluation and a level of boycott affecting international brands, our diversified portfolio and agile response have enabled us to navigate the challenging environment successfully. (Zoran Bogdanovic, CEO)
Q: How has the channel mix evolved, and what are the trends in consumer buying habits between at-home and out-of-home?
A: We have seen volume growth in both at-home and out-of-home channels, with a slightly higher growth in out-of-home. This aligns with our continuous investments in targeted campaigns and activations in both channels. The positive performance in out-of-home is particularly encouraging. (Zoran Bogdanovic, CEO)
Q: Can you comment on the consumer environment in Nigeria and your pricing strategy there?
A: In Nigeria, we have seen strong volume growth despite currency volatility and socio-economic challenges. Our pricing strategy is data-driven and tailored by region, category, and package, allowing us to effectively manage price, mix, and volume. We remain positive about Nigeria's performance for the year. (Zoran Bogdanovic, CEO)
Q: What led to winning the Candler Cup in Greece and Cyprus, and can these practices be applied to other markets?
A: Winning the Candler Cup reflects our execution excellence and bespoke capabilities in Greece and Cyprus. These practices, including customer intimacy and continuous performance improvement, are integral to our operations and can be applied across other markets to drive success. (Zoran Bogdanovic, CEO)
Q: How do you ensure visibility and control over inventories in your Premium Spirits business, avoiding issues like destocking cycles seen in other companies?
A: We maintain close collaboration with brand owners and diligent planning routines, ensuring continuity of stock and mindful management of inventory levels. Our strong data and insights capabilities provide us with better visibility and control, preventing destocking issues. (Zoran Bogdanovic, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
