CCE released its FY results yesterday

CCE released its FY results yesterday

Is Coca-Cola Enterprises about to dive into the M&A arena?

That was the question some analysts were asking in the wake of CCE's full-year results yesterday, during which the company said it plans to spend a further US$800m on share repurchases. That, along with $600m to $650m in free cash flow in FY14, according to analysts Bernstein, means a lot of balance sheet flexibility.

“Is an acquisition, for example, taking on higher priority for the company?” Bernstein asks in a note today (6 February).

Analysts at Nomura are less circumspect. “We do expect some acquisition opportunities to emerge in the next few years,” they believe.

A major purchase would fit into the European soft drinks industry's trend for consolidation that saw Suntory Beverage & Food snap up GlaxoSmithKline brands Lucozade and Ribena late last year and the Coca-Cola Co's move to take full control of UK smoothie maker Innocent Drinks.

However, Nomura has a warning for CCE. It believes the company bungled in its failure to land the Coca-Cola Co's Germany unit, adding: “We see some questions about (CCE's) success in expanding the geographical footprint.”

Bernstein is also unsure why CCE's energy drinks volumes growth in the final quarter of the year dropped to 6%, from the company's historical double-digit increases in the category. 

“What are the drivers of this weakness?” the analysts ask. “Has the company been observing any change in the competitive landscape after Suntory’s agreement to acquire Lucozade and Ribena?”

What was clear from yesterday's results, however, is that the European markets seem more resilient than North America's to declines in low- and no-sugar beverages. Coca-Cola Zero performed well for CCE, with volumes up by 15% in the full-year and up 20% in the fourth quarter.

Analysts at CLSA say: “While diet sodas have been under heavy pressure in the US, CCE has yet to see similar trends in its European business.”

Concerns around the artificial sweetener aspartame have hurt the US's diet soda market lately, with Dr Pepper Snapple Group's chief saying that he has been "shocked" by the impact. PepsiCo has also expressed concerns

No such trouble yet for CCE, as Coca-Cola Zero sails on regardless. If only its other assets were performing as well.