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A-Brands

Coca-Cola HBC Sees Lower Margins After First-Half Profit Surges

Soft drinks bottler Coca-Cola HBC AG has said that it expects lower margins in the second half due to higher costs and inflation, while reporting a jump in first-half profit as people returned to restaurants and cinemas after lockdowns.

The company, which bottles and sells Coca-Cola drinks in 28 countries, said comparable operating profit rose 67.8% to €350.3 million for the six months ended July 2.

In terms of its core focus areas, it said that sparkling volumes were up 16.2% in the period, with Adult sparkling up 37.0% and Low/no sugar up 40.3%. Energy drinks volumes were up 66.1%, driven by the performance of its Monster, Burn and Predator brands.

Strategic Focus

"We are seeing excellent performance from our areas of strategic focus – in particular Low- and no-sugar sparkling, Adult sparkling and Energy," Zoran Bogdanovic, chief executive said. "We have strengthened our Coffee strategy with Caffè Vergnano, which will add a premium offering alongside the broad appeal of Costa Coffee."

Bogdanovic added that the business has also "made progress" on its World Without Waste agenda, with the launch of 100% recycled PET packaged beverages.

Coca-Cola HBC, which had managed to save about €120 million in operational spending in 2020 due to the pandemic, said it expects €100 million in costs to return in the second half. It recently announced plans to optimise its supply chain, alongside Blue Yonder.

Input Costs

Higher input costs-led inflation and a Polish sugar tax, which hurt company earnings in the region, are expected to have a negative impact on the bottler's margins, it said.

"We are encouraged by the strength of the performance," Bogdanovic added, "and while conscious of the risks as the COVID-19 pandemic continues to impact our markets, we continue to expect a strong recovery in FX-neutral revenues and now believe that we can achieve a 20-30bps EBIT margin expansion this year.”

News by Reuters, edited by ESM. For more A-Brands stories, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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