Coca-Cola HBC shares fizz as anchor bottler unveils record profits

Shares of Coca-Cola Hellenic Bottling Company jumped on Wednesday after the group reported record annual profits for the third consecutive year.

The London-listed anchor bottler, which sells Coca-Cola drinks in 29 countries, said comparable operating profit rose 16.6 percent to €1.08 billion (£920 million) in 2023.

Organic net sales rose 16.9 percent as the group implemented price increases in response to inflationary pressures and enjoyed much higher demand for its energy and coffee products.

Sales growth was partially offset by unfavorable currency movements in the Russian ruble, Nigerian naira and Egyptian pound.

But the Swiss-based company’s reported revenue still rose 10.7 percent to €10.2 billion, thanks to solid performance in established and emerging markets and the consolidation of Russian firm Multon Partners.

Following the results announcement, the group’s shares rose 5.8 per cent to £23.34 in early trading, making it the best performing index of the FTSE 100 Index. Over the past twelve months they have grown by approximately 16 percent.

Coca-Cola HBC expects much more modest levels of growth this year, including organic sales growth of 6 to 7 percent and operating profit growth of 3 to 9 percent.

CEO Zoran Bogdanovic warned investors of a challenging “macroeconomic and geopolitical environment.”

But Bogdanovic said the group is “confident that we will continue to make progress towards our medium-term growth objectives.”

The company noted that cost pressures eased in the second half of 2023 as some raw materials declined in price, boosting full-year comparable gross profit margin by 80 basis points.

Coca-Cola HBC traces its roots back to 1950s Nigeria, but the company began in its current form in 2000 after the merger of Coca-Cola Beverages and the Hellenic Bottling Company.

The company packages and sells dozens of drinks ranging from Fanta and Sprite to Schweppes, Fuze tea, Dasani water and Monster Energy.

It has increasingly diversified into the premium spirits sector and recently bought Brown-Forman Finland, owner of vodka brand Finlandia.

The Luxembourg company Kar-Tess has the largest individual stake in the group, followed by Coca-Cola itself, which owns a 21 percent stake.

On Tuesday, the soft drink giant reported that fourth-quarter organic sales rose 12 percent to a better-than-expected $10.8 billion, buoyed by higher prices and unit case volume purchasing.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘The real secret formula to Coca-Cola’s success doesn’t lie in a safe. Instead, it lies in successfully aligning its interests with those of its bottling partners.

‘The group does this by holding a stake of approximately 20 to 25 percent in the major bottlers, with a significant portion of the remaining shares typically held by a single family.

“This ownership structure helps focus on long-term growth, with skin-in-the-game family owners naturally being more patient than typical public investors.”