Business Context and Reporting Period
Company: Coca-Cola Europacific Partners Plc (CCEP)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six months ended 1 July 2022 (H1 2022)
Context: CCEP is a leading consumer goods group in Western Europe and the Asia Pacific region. The results reflect the full impact of the acquisition of Coca-Cola Amatil Limited (API), completed on 10 May 2021. The report includes unaudited financial statements and pro forma information to illustrate the effects of the acquisition as if it had occurred on 1 January 2021.
Key Financial Metrics
| Metric | H1 2022 (As Reported) | H1 2021 (As Reported) | Change (%) | H1 2022 (Pro Forma Comparable) |
|---|---|---|---|---|
| Revenue (€M) | 8,280 | 5,918 | +40.0% | +17.0% (vs H1 2021) |
| Operating Profit (€M) | 967 | 520 | +86.0% | +29.0% (vs H1 2021) |
| Profit After Taxes (€M) | 675 | 246 | +174.5% | +46.5% (vs H1 2021) |
| Diluted EPS (€) | 1.46 | 0.53 | +175.5% | +45.5% (vs H1 2021) |
| Net Debt (€M) | 10,450 | 11,607 (as of 31 Dec 2021) | -10.0% | N/A |
| Operating Cash Flow (€M) | 1,653 | 908 | +82.0% | N/A |
Volume Performance: Total volume increased by 32.0% (1,618M UC) on an as-reported basis. On a pro forma comparable basis, volume grew 13.0%, driven by the recovery of the Away from Home (AFH) channel and tourism in Europe.
Material Changes vs. Prior Period
- Revenue Growth: Reported revenue growth of 40.0% was driven by the inclusion of API operations, volume recovery, and price increases. Pro forma comparable revenue growth was 17.0%, with revenue per unit case up 4.5% due to favorable pricing and mix.
- Profitability: Operating profit surged 86.0% reported, but 29.0% on a pro forma comparable basis. This reflects higher volumes and efficiency programs, partially offset by commodity inflation and adverse mix.
- Cost of Sales: Comparable cost of sales per unit case increased 5.5% (pro forma fx-neutral), driven by higher concentrate costs, commodity inflation, and adverse mix, partially mitigated by fixed cost recovery from higher volumes.
- Geographic Performance:
- Europe: Revenue +20.0% (reported), +19.0% (fx-neutral). Volume recovery in AFH channels was strong across Great Britain, Iberia, and France.
- API: Revenue +243.0% (reported) due to acquisition. Pro forma comparable revenue grew 15.0%, supported by strong trading in Indonesia during Ramadan and momentum in Australia/New Zealand.
Guidance, Outlook, and Risks
- Dividend: First-half interim dividend of €0.56 per share declared and paid. The second-half dividend will be set to achieve an annualized total dividend payout ratio of approximately 50% of comparable profit after tax.
- Tax Outlook: The effective tax rate for H1 2022 was 25%. Management expects the full-year 2022 comparable effective tax rate to be between 22% and 23%.
- Strategic Actions:
- Sale of NARTD own brands in API to The Coca-Cola Company for A$275m is substantially complete.
- Exit from production and distribution of beer and apple cider in Australia completed.
- Principal Risks:
- Geopolitical/Economic: War in Ukraine impacting energy supply (natural gas), raw materials, and cyber risks. Elevated inflation and potential global recession.
- Energy Crisis: Potential shortages and price increases in natural gas, particularly in Europe during colder months.
- Supply Chain: Disruptions in raw materials, packaging (glass, cans), and logistics.
Investor Verification Checklist
- Pro Forma Adjustments: Verify the assumptions used in pro forma financials, specifically the treatment of API acquisition costs and the hypothetical start date of 1 January 2021.
- Commodity Hedging: Review the extent of hedging coverage for key commodities (sugar, PET, aluminum) given the reported 5.5% increase in cost of sales per unit case.
- Energy Exposure: Assess the specific impact of natural gas price volatility on European manufacturing sites and the progress of conversion to oil at selected sites.
- API Integration: Monitor the realization of cost synergies and the completion of the NARTD brand sale to The Coca-Cola Company.
- FX Sensitivity: Evaluate the impact of currency fluctuations, particularly the Euro vs. GBP and AUD, on reported revenue and profit margins.