COCA-COLA EUROPACIFIC PARTNERS Plc current report, Q1 FY2024

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Business Context and Reporting Period

Company: Coca-Cola Europacific Partners Plc (CCEP)
Filing Date: February 23, 2024
Event: Completion of the acquisition of 100% of Coca-Cola Beverages Philippines, Inc. (CCBPI) from The Coca-Cola Company (KO) in a joint venture with Aboitiz Equity Ventures Inc. (AEV).
Ownership Structure: CCEP holds 60% (controlling interest); AEV holds 40% (non-controlling interest).
Strategic Impact: The transaction expands CCEP's footprint in the Australia, Pacific & South East Asia (APS) segment and is immediately earnings per share (EPS) accretive.

Key Financial Metrics

Transaction Valuation: $1.8 billion (debt-free, cash-free basis for 100% of CCBPI).
Funding: Existing liquidity and incremental borrowing.
CCBPI FY23 Performance (Unaudited, Adjusted):

  • Revenue: ~$1.9 billion (~€1.7 billion)
  • Operating Profit: ~$115 million (~€105 million)
Pro Forma FY23 Combined Metrics (Adjusted Comparable):
  • Revenue: €20,046 million
  • Operating Profit: €2,478 million
  • Profit After Taxes: €1,738 million
  • Diluted EPS: €3.74
Leverage: CCEP closed FY23 at the top end of its mid-term guided range of 3.0x Net Debt to Comparable EBITDA. The transaction is expected to have a modest impact on leverage.

Material Changes vs. Prior Period

The primary material change is the consolidation of CCBPI into CCEP's financial statements effective February 23, 2024. The filing provides pro forma adjusted financial information for FY23 assuming the acquisition occurred on January 1, 2023, to illustrate comparability. Key adjustments include:

  • Revenue Increase: Pro forma revenue increases by €1,744 million compared to reported CCEP revenue of €18,302 million.
  • Profit Increase: Pro forma operating profit increases by €105 million compared to reported CCEP operating profit of €2,373 million (comparable).
  • Segment Renaming: The Australia, Pacific & Indonesia (API) segment is renamed Australia, Pacific & South East Asia (APS).

Guidance, Outlook, and Risks

Management Commentary: The acquisition strengthens the partnership with The Coca-Cola Company and supports long-term growth strategies through diversification and scale. It allows for the leveraging of best practices and talent, particularly supporting Indonesia's transformation journey.
Outlook: The transaction is immediately EPS accretive. No specific future financial guidance was updated in this filing, though the company aims to drive sustainable growth.
Risks and Contingencies:

  • Integration Risk: Potential difficulties, delays, or higher costs in integrating CCBPI's operations.
  • Geopolitical & Supply Chain: Risks related to global supply chains, geopolitical tensions (Middle East, Asia Pacific), and energy shortages.
  • Economic Conditions: Risks of global recession, elevated inflation, and reduced consumer disposable income.
  • Regulatory: Potential water use reductions due to national or regional regulations.

Investor Verification Checklist

  • Valuation Accuracy: Verify the $1.8 billion debt-free, cash-free valuation and the specific terms of the 60:40 ownership split with AEV.
  • Pro Forma Adjustments: Review the unaudited FY23 CCBPI results and the specific accounting adjustments (inventory step-up, financing costs) used to derive the €20,046 million pro forma revenue.
  • Leverage Impact: Confirm the exact impact on Net Debt to Comparable EBITDA post-closing, given the company was already at the top of its 3.0x guidance range.
  • Integration Timeline: Monitor the timeline for operational integration and the realization of any anticipated synergies or cost savings not included in the pro forma data.
  • Regulatory Approvals: Ensure all necessary regulatory approvals for the joint venture in the Philippines and other jurisdictions are fully secured and active.