Coca-Cola HBC achieves record profits and revenues despite Ukraine war

Coca-Cola HBC shares soared on Thursday after the bottler beat profit forecasts against a challenging economic backdrop.

The anchor bottler’s net sales revenue increased by 28.2 per cent to a record €9.2billion in 2022, following price hikes and solid organic growth in established and developing markets.

Trading received a further boost from acquiring a majority stake in the Cola Bottling Company of Egypt, beneficial currency movements and volume expansion in sparkling, energy and coffee brands.

Net profits tumbled by around a quarter to €415.4million, mainly due to impairment costs related to the firm’s decision to restructure its operations in Russia amid the escalation of the Ukraine war.

But comparable operating profits rose to their highest ever levels of €929.7million, compared to a forecast range of €860million to €900million, as did free cash flow.

This was despite margins being squeezed by greater production, marketing and energy costs and a one-off benefit from selling property in Cyprus in 2021.

Zoran Bogdanovic, the company’s chief executive, said: ‘We delivered a strong performance in 2022 against a challenging backdrop, achieving record levels of revenue, comparable EBIT and free cash flow.

‘Consumer demand for our products and in our categories remained good. The power of our portfolio and consistent investment in our capabilities allowed us to balance pricing and mix enhancements, while also achieving another year of strong share gains.’

Coca-Cola HBC shares were the best performer on the FTSE 100 Index on Tuesday, rising 6.5 per cent to £20.67, although they remain below levels prior to Russia’s full-scale invasion of Ukraine.

The group expects organic revenues in 2023 to exceed its 5 to 6 per cent target span, although it warned that underlying operating earnings could fall by up to 3 per cent this year. 

Part of the hit to profits is set to come from adverse currency movements, but HBC also predicts that the average cost of each case sold to customers would rise by a ‘low teens per cent’.

Energy and commodity prices have increased since the Russian military’s offensive escalated in February 2022, sending companies across the globe scrambling for ways to rein in costs while households struggle to manage their bills.

Most companies have hiked prices in a bid to pass on some of these costs to their consumers.

Although a cost of living crisis has seen a shift in consumer spending, packaged beverage and food makers have continued to see resilient demand.

The Coca-Cola Company, which owns a 21 per cent holding in Swiss-headquartered HBC, credited price hikes with its organic revenues tipping above $10billion in the final three months of last year.

This helped the multinational drinks giant’s operating income offset higher marketing and operating expenses to climb by almost a quarter to $2.1billion

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, also said the firm’s broad mixture of products, which include Fanta, Sprite and Schweppes, ‘has undoubtedly played a large in its resilient sales too.’