Experienced hands hold firm at Coca-Cola European Partners - Analysis
Former CCE boss John Brock now sits at the helm of CCEP
It was a bruising first results announcement for management at the newly-formed Coca-Cola European Partners.
Sales were down and trademark Coke volumes slipped almost 4% as bad weather in key markets over the first six months of the year depressed performance. The slow start, and weak Q2, meant a full-year forecast of flat sales and only "modest" operating profits growth.
But if you were looking for panic, there was little evident in the executive ranks. CCEP may only be a few months old, but its leadership team, comprising the former management of Coca-Cola Enterprises, has seen this all before. John Brock, the former CEO of CCE who now sits atop the enlarged group, remained bullish, saying the declines actually reinforced the need behind establishing CCEP because of the synergies it creates. According to Brock, the company is on track to deliver between EUR315m (US$353m) and EUR340m in savings by mid-2019.
However, there were still some outstanding issues for analysts.
Wells Fargo's Bonnie Herzog said continuing declines for trademark Coke (-3.5% in Q2) were driving the weaker-than-expected H1 figures. Meanwhile, a transition to new recyclable packing in Germany from returnable bottles was also a headwind, as were lower tourism numbers in Belgium and France over the Summer because of terrorist attacks.
There was also concern over the effects that a sugar tax in the UK would have on sales, though Stifel's Mark Swartzberg noted that this would be a "small negative" given that the UK market is only 12% of CCEP's sales and the global Coca-Cola network has prior dealings with this sort of regulatory issue.
Indeed, it is the experience of those at the helm of CCEP that analysts would refer to when announcing - despite this week's results - optimism over the company's future.
Swartzberg praised management's track record in free-cash conversion after it made it a priority. Bernstein's Ali Dibadj was even more forthcoming: "We have been impressed with management's operational strengths and track record of return of cash to shareholders," he said.
With CCEP set for an investor conference next week, more light will be shed on long-term growth prospects. For now, however, analysts seem content with the prospect of old heads on new shoulders.
The Coca-Cola Company – Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report
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Coca-Cola European Partners (CCEP) has upgraded its full-year outlook as the company nears completion of its first calendar year....
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