Business Context and Reporting Period
Company: Coca-Cola Europacific Partners Plc (CCEP)
Reporting Period: Full year ended 31 December 2021
Filing Type: Form 6-K (Preliminary unaudited results)
Key Event: The results reflect the acquisition of Coca-Cola Amatil Limited (API), completed on 10 May 2021. The filing includes "Pro forma" financial information to illustrate the combined group's performance as if the acquisition had occurred at the beginning of the period.
Key Financial Metrics
| Metric | As Reported (€M) | Comparable (€M) | Pro Forma Comparable (€M) |
|---|---|---|---|
| Revenue | 13,763 | 13,763 | 14,819 |
| Operating Profit | 1,516 | 1,772 | 1,886 |
| Profit After Tax | 988 | 1,302 | 1,369 |
| Diluted EPS (€) | 2.15 | 2.83 | 2.97 |
| Net Debt (€M) | 11,607 | N/A | |
| ROIC (Comparable) | 9.2% | Pro Forma: 8.0% |
Volume Performance: Total comparable volume increased 23.5% (As Reported) and 4.5% (Pro Forma) versus 2020. Europe volume grew 5.0% (Pro Forma), while API volume grew 4.0% (Pro Forma).
Material Changes vs. Prior Period
- Revenue Growth: Reported revenue rose 30.0% to €13.76 billion, driven primarily by the API acquisition. On a Pro Forma Comparable basis, revenue grew 9.5% (7.5% FX-neutral).
- Profitability: Reported operating profit surged 86.5% to €1.52 billion. Pro Forma Comparable operating profit increased 26.0% (23.5% FX-neutral) to €1.89 billion, reflecting efficiency programs and volume recovery.
- Cost Pressures: Cost of sales per unit case increased 1.5% (Pro Forma Comparable) due to commodity inflation, higher concentrate costs linked to revenue per unit case growth, and adverse mix, partially offset by fixed cost recovery from higher volumes.
- Debt Position: Net debt increased significantly to €11.6 billion from €5.7 billion in 2020, reflecting the financing of the API acquisition.
- Dividends: Dividend per share increased 64.5% to €1.40, maintaining a payout ratio of approximately 50% of comparable profit after tax.
Guidance, Outlook, and Risks
- Outlook: Management expects the API integration to continue progressing well, with portfolio reorientation to focus on NARTD, RTD alcohol, and Spirits. Initiatives to exit beer and cider production in Australia are expected to complete by the end of the first half of 2022.
- Sustainability: Europe achieved its 2023 recycled plastic (rPET) target two years early (~53%). Two manufacturing sites in Spain and Sweden are certified carbon neutral.
- Risks:
- Integration Risk: Challenges in integrating API, including potential disruption to business and diversion of management attention.
- Macro Factors: Ongoing impact of the COVID-19 pandemic (specifically Omicron variant), commodity inflation, and foreign exchange volatility.
- Regulatory/Tax: Changes in statutory income tax rates in the UK, Netherlands, and Indonesia impacted the effective tax rate.
- Unusual Items: The "Comparable" results exclude restructuring charges (€136M), acquisition costs (€49M), inventory fair value step-up (€48M), European flooding costs (€9M), and net tax items (€127M related to rate changes).
Investor Verification Checklist
- Pro Forma Adjustments: Verify the assumptions used for the Pro Forma financials, specifically the treatment of API's historical results and the impact of acquisition accounting fair value adjustments.
- Debt Servicing: Assess the impact of the increased net debt (€11.6B) on future interest coverage and liquidity, given the weighted average interest rate of c.0.40% for acquisition financing.
- Commodity Inflation: Monitor the sustainability of margins given the 1.5% increase in cost of sales per unit case driven by concentrate and commodity costs.
- API Integration: Track the progress of the portfolio reorientation (sale of NARTD own brands, exit of beer/cider) and the realization of expected synergies.
- Tax Rate Volatility: Review the impact of the €127M deferred tax revaluation due to UK, Netherlands, and Indonesia tax law changes on future effective tax rates.