REG - Coca-Cola HBC AG - SOLID PERFORMANCE DESPITE VOLUME PRESSURE <Origin Href="QuoteRef">CCH.L</Origin> - Part 3
06/11/2014 08:41
- Part 3: For the preceding part double click ID:nRSF2845Wb
months ended Nine months ended
26 September 2014 27 September 2013 26 September 2014 27 September 2013
Volume in unit cases(1) (million)
Established countries 167.2 185.0 473.1 504.4
Developing countries 100.2 112.1 270.5 294.4
Emerging countries 280.2 277.9 774.2 780.6
Total volume 547.6 575.0 1,517.8 1,579.4
Net sales revenue (E million)
Established countries 660.4 717.3 1,888.4 1,985.0
Developing countries 303.2 333.2 807.9 858.9
Emerging countries 853.5 867.8 2,303.9 2,455.5
Total net sales revenue 1,817.1 1,918.3 5,000.2 5,299.4
Operating profit (E million)
Established countries 51.3 71.5 110.2 105.4
Developing countries 32.3 37.6 55.1 38.1
Emerging countries 96.2 96.5 178.6 196.1
Total operating profit 179.8 205.6 343.9 339.6
Reconciling items (E million)
Finance costs, net (15.6) (18.6) (54.5) (68.0)
Tax (38.2) (46.7) (72.3) (70.2)
Share of results of equity method investments 7.1 7.0 11.1 11.4
Non-controlling interests 0.1 (0.1) 0.1 -
Profit after tax attributable to owners of the parent 133.2 147.2 228.3 212.8
(1) One unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. Volume data is derived from unaudited operational data.
4. Tangible and intangible assets
Property, plant and equipment E million Intangible assets E million
Opening net book value as at 1 January 2014 2,901.9 1,921.3
Additions 213.2 14.1
Reclassified to assets held for sale (1.0) -
Disposals (4.2) -
Depreciation and amortisation (258.6) (0.3)
Foreign exchange differences (59.7) (7.8)
Effect of hyperinflation (0.2) -
Closing net book value as at 26 September 2014 2,791.4 1,927.3
5. Net debt
As at
26 September 2014E million 31 December 2013E million
Long-term borrowings 1,572.8 1,853.6
Short-term borrowings 502.7 446.2
Cash and cash equivalents (649.8) (737.5)
Net debt 1,425.7 1,562.3
During January 2014, the remaining amount of the E500 million bond issued in 2008 (E317.0 million) was repaid using part of
the cash balance. During September 2014, the outstanding bond of USD 400 million maturing in September 2015 was
reclassified to short term debt.
6. Fair value
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk,
and commodity price risk), credit risk, liquidity risk and capital risk. There have been no changes in the risk management
policies since the year end.
The Group's financial instruments recorded at fair value are included in Level 2 within the fair value hierarchy and
comprise derivatives. There have been no changes in valuation techniques and inputs used to determine their fair value
since 31 December 2013 (as described in the 2013 Annual Report available on the Coca-Cola HBC's web site:
www.coca-colahellenic.com). As at 26 September 2014, the total financial assets included in Level 2 was E28.2 million and
the total financial liabilities E64.7 million.
There were no transfers between level 1, 2 and 3 during the first nine months of 2014. The fair value of bonds and notes
payable as at 26 September 2014, including the current portion, is E1,818.1 million, compared to their book value of
E1,715.9 million, including the current portion.
7. Restructuring costs
Restructuring costs amounted to E18.6 million before tax in the third quarter of 2014. The Group recorded E16.7 million,
E0.5 million and E1.4 million of restructuring charges in its established, developing and emerging countries respectively.
For the third quarter of 2013, restructuring costs amounted to E1.9 million. The Group recorded E2.1 million and E0.3
million of restructuring charges in its established and emerging countries respectively, while the partial reversal of
certain restructuring provisions for developing countries resulted in recognizing E0.5 million gains in this segment. The
restructuring costs mainly concern redundancy costs.
Restructuring costs amounted to E30.5 million before tax in the first nine months of 2014. The Group recorded E22.5
million, E1.6 million and E6.4 million of restructuring charges in its established, developing and emerging countries
respectively. For the first nine months of 2013, restructuring costs amounted to E24.3 million. The Group recorded E23.1
million and E1.4 million of restructuring charges in its established and emerging countries respectively, while the partial
reversal of certain restructuring provisions for developing countries resulted in recognizing E0.2 million gains in this
segment. The restructuring costs mainly concern redundancy costs.
8. Total finance costs, net
Three months ended
26 September2014E million 27 September 2013E million
Interest income (2.6) (2.5)
Finance costs 17.0 20.3
Net foreign exchange losses 0.4 0.5
Loss on net monetary position 0.8 0.3
Total finance costs, net 15.6 18.6
Nine months ended
26 September2014E million 27 September 2013E million
Interest income (7.3) (6.6)
Finance costs 51.4 73.1
Net foreign exchange losses 7.1 0.2
Loss on net monetary position 3.3 1.3
Total finance costs, net 54.5 68.0
Total net finance costs for the third quarter and first nine months of 2014 were lower by E3.0 million and E13.5 million
respectively, compared to the same prior year periods. This is mainly due to a significant decrease in interest expense
(cycling the one-off impact of the tender of the E500 million Bond in 2013), which was partially offset by the increase of
net foreign exchange losses.
Hyperinflation
Belarus has been considered to be a hyperinflationary economy since the fourth quarter of 2011. The three year cumulative
inflation exceeded 100% and therefore Belarus was consolidated in terms of the measuring unit at the balance sheet date and
translated at the closing exchange rate. The restatement was based on conversion factors derived from the Belarus Consumer
Price Index (CPI) as compiled by the National Statistical Committee of the Republic of Belarus. The conversion factor used
for September 2014 was 1.134 which resulted in a net monetary loss for the nine months of 2014 of E3.3 million.
9. Tax
The Group's effective tax rate for 2014 may differ from the parent company statutory tax rate as a consequence of a number
of factors, the most significant of which are: the statutory tax rates of the countries in which the Group operates, the
non-deductibility of certain expenses, non-taxable income and one off tax items.
10. Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to the owners of the parent by the weighted
average number of shares outstanding during the period (third quarter of 2014: 364,309,304, first nine months of 2014:
364,287,910, third quarter of 2013: 363,613,253, first nine months of 2013: 363,315,609). Diluted earnings per share is
calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive
ordinary shares arising from exercising employee stock options.
11. Share capital
On 25 April 2013, Coca-Cola HBC acquired 96.85% (355,009,014 shares) of the issued Coca-Cola Hellenic Bottling Company SA
("CCHBC SA") shares, including shares represented by American depositary shares, following the successful completion of its
voluntary share exchange offer and became the new parent company of the Group.
On 17 June 2013, Coca-Cola HBC completed its statutory buy-out of the remaining shares of CCHBC SA that it did not acquire
upon completion of its voluntary share exchange offer. Consequently, CCHBC SA is now a 100% owned subsidiary of Coca-Cola
HBC. Out of the remaining 3.15% interest acquired in CCHBC SA, representing 11,544,493 shares, 11,467,206 shares were
exchanged for equal number of Coca-Cola HBC shares and 77,287 shares were acquired for a cash consideration of E1.0
million.
In 2013, the share capital of Coca-Cola HBC increased by the issue of 1,199,080 new ordinary shares following the exercise
of stock options pursuant to the Coca-Cola HBC AG's employees' stock option plan. Total proceeds from the issuance of the
shares under the stock option plan amounted to E16.4 million.
In the first quarter of 2014, the share capital of Coca-Cola HBC increased by the issue of 38,245 new ordinary shares
following the exercise of stock options pursuant to the Coca-Cola HBC AG's employees' stock option plan. Total proceeds
from the issuance of the shares under the stock option plan amounted to E0.4 million.
In the second quarter of 2014, the share capital of Coca-Cola HBC increased by the issue of 18,663 new ordinary shares
following the exercise of stock options pursuant to the Coca-Cola HBC AG's employees' stock option plan. Total proceeds
from the issuance of the shares under the stock option plan amounted to E0.2 million.
In the third quarter of 2014, the share capital of Coca-Cola HBC increased by the issue of 18,500 new ordinary shares
following the exercise of stock options pursuant to the Coca-Cola HBC AG's employees' stock option plan. Total proceeds
from the issuance of the shares under the stock option plan amounted to E0.3 million.
Following the above changes, and including 3,445,060 ordinary shares held as treasury shares, out of which 14,925 shares
represent the initial ordinary shares of Coca-Cola HBC, on 26 September 2014 the share capital of the Group amounted to
E1,997.8 million and comprised 367,765,633 shares with a nominal value of CHF 6.70 each.
12. Non-controlling interests
On 8 June 2011, the Board of Directors of the Coca-Cola HBC's subsidiary Nigerian Bottling Company plc ("NBC") resolved to
propose a scheme of arrangement between NBC and its minority shareholders, involving the cancellation of part of the share
capital of NBC. The transaction was approved by the Board of Directors and General Assembly of NBC on 8 June 2011 and 22
July 2011 respectively and resulted in the acquisition of the remaining 33.6% of the voting shares of NBC bringing the
Group's interest in the subsidiary to 100%. The transaction was completed in September 2011 and NBC was de-listed from the
Nigerian Stock Exchange. The consideration for the acquisition of non controlling interests was E100.2million, including
transaction costs of E1.8 million, out of which E75.2 million was paid as of 26 September 2014 (as of 31 December 2013:
E75.2 million). The difference between the consideration and the carrying value of the interest acquired (E60.1 million)
has been recognised in retained earnings while the accumulated components recognised in other comprehensive income have
been reallocated within the equity of the Group.
On 14 January 2013, the Group acquired 14% of Coca-Cola Hellenic Bottling Company Bulgaria AD, bringing the Group's
interest in the subsidiary to 99.39%. The consideration paid for the acquisition of non controlling interests acquired was
E13.3 million and the carrying value of the additional interest acquired was E8.2 million. The difference between the
consideration and the carrying value of the interest acquired has been recognised in retained earnings.
13. Dividends
The shareholders of Coca-Cola HBC AG approved the dividend distribution of 0.354 euro cents per share at the Annual General
Meeting held on 25 June 2014. The total dividend amounted to E130.2 million and was paid on 29 July 2014.
On 19 June 2013, the extraordinary general meeting of Coca-Cola HBC AG approved the distribution of a E0.34 dividend per
share. The total dividend amounted to E124.7 million and was paid on 23 July 2013.
14. Contingencies
There have been no significant changes in contingencies since 31 December 2013 (as described in the 2013 UK Annual
Financial Report available on the Coca-Cola Hellenic's web site:
www.coca-colahellenic.com).
15. Commitments
As of 26 September 2014 the Group has capital commitments of E85.8 million (31 December 2013: E80.0 million), which mainly
relate to plant and machinery equipment.
16. Number of employees
The average number of full-time equivalent employees in the first nine months of 2014 was 36,722 (38,312 for the first nine
months of 2013).
17. Related party transactions
a) The Coca-Cola Company
As at 26 September 2014, The Coca-Cola Company and its subsidiaries (collectively, ''TCCC'') indirectly owned 23.1% (2013:
23.2%) of the issued share capital of Coca-Cola HBC.
Total purchases of concentrate, finished products and other materials from TCCC and its subsidiaries during the first nine
months and the third quarter of 2014 amounted to E1,128.7 million and E382.0 million (E1,079.6 million and E363.8 million
in the respective prior year period). Total net contributions received from TCCC for marketing and promotional incentives
during the same period amounted to E49.7 million and E19.1 million (E66.3 million and E24.2 million in the respective prior
year period).
During the first nine months and the third quarter of 2014, the Group sold E21.3 million and E9.4 million of finished goods
and raw materials respectively to TCCC (E22.7 million and E8.9 million in the respective prior year period) while other
income from TCCC was E11.9 million and E3.3 million respectively (E12.3 million and E3.1 million in the prior year period).
Other expenses from TCCC amounted to E0.7 million and E0.6 for the first nine months and third quarter of 2014 (E2.8
million and E0.2 million in the respective prior year periods).
As at 26 September 2014, the Group had a total amount of E104.8 million (E73.6 million as at 31 December 2013) due from
TCCC, and had a total amount of E251.5 million (E215.4 million as at 31 December 2013) due to TCCC.
An amount of E14.1 million was paid to TCCC in the second quarter of 2014 in relation to the acquisition of certain
intangible assets.
b) Kar-Tess Holding
Frigoglass S.A. ('Frigoglass')
Frigoglass, a company listed on the Athens Exchange, is a manufacturer of coolers, cooler parts, glass bottles, crowns and
plastics. Truad Verwaltungs AG, in its capacity as trustee of a private discretionary trust established for the primary
benefit of present and future members of the family of the late Anastasios George Leventis, currently indirectly owns 44.5%
of Frigoglass through Torval Investment Corp., Lavonos Limited, Thrush Investments Holdings, Tinola Holdings S.A., Boval
Limited, Boval S.A., Rondo Holding S.A. and Eagle Enterprises A.E. Truad Verwaltungs AG, in its capacity as trustee of a
private discretionary trust established for the primary benefit of present and future members of the family of the late
Anastasios George Leventis, holds 100% of the share capital of Torval Investment Corp., whose 100% owned subsidiary Lavonos
Limited holds 100% of the share capital of Boval Limited as nominee for Torval Investment Corp, where Boval Limited
controls its 100% owned subsidiary Boval S.A., which controls Kar Tess Holding, which holds approximately 23.2% (2013:
23.2%) of Coca Cola HBC's total issued capital. Frigoglass has a controlling interest in Frigoglass Industries Limited, a
company in which Coca-Cola HBC has a 23.9% effective interest, through its investment in NBC.
During the first nine months and the third quarter of 2014, the Group made purchases of E58.4 million and E16.5 million
respectively (E81.0 million and E17.1 million in the prior-year periods) of coolers, raw materials and containers from
Frigoglass and its subsidiaries and incurred maintenance and other expenses of E10.5 million and E4.0 million respectively
(E8.0 million and E2.9 million in the prior-year periods). The Group record other income of E0.1 million from Frigoglass
both during the first nine months and the third quarter of 2014 (E0.1 million and nil for prior-year periods under review).
As at 26 September 2014, Coca-Cola HBC owed E11.5 million (E11.7 million as at 31 December 2013) to, and was owed E0.3
million (E0.5 million as at 31 December 2013) by Frigoglass.
c) Other related parties
During the first nine months and the third quarter of 2014, the Group purchased E87.3 million and E26.4 million of raw
materials and finished goods respectively (E93.2 million and E26.4 million in the prior year period) while the Group
recorded sales of finished goods of E0.1 million for both the first nine months and third quarter of 2014 (nil for both
prior year periods under review). In addition, the Group received reimbursement for direct marketing expenses for both the
first nine months and the third quarter of 2014 of E0.2 million (E0.4 million and nil for the respective prior year periods
under review). Furthermore the Group added E1.3 million and E0.3 million of tangible fixed assets during the first nine
months and the third quarter of 2014 respectively, (nil for both prior year periods under review). During the first nine
months and the third quarter of 2014 the Group incurred other expenses of E23.2 million and E5.4 million (E25.9 million and
E7.3 million in the prior year period) and recorded income of E0.4 million and E0.1 million respectively (E3.9 million and
E0.5 million in the prior year period). As at 26 September 2014, the Group owed E14.3 million (E6.8 million as at 31
December 2013) to, and was owed E1.8 million (E5.7 million as at 31 December 2013) by other related parties.
d) Joint Ventures
During the first nine months and the third quarter of 2014, the Group purchased E17.5 million and E6.7 million of finished
goods (E19.2 million and E6.1 million in the prior-year periods) from joint ventures. In addition, the Group did not
receive reimbursement for direct marketing expenses for both of the first nine months and the third quarter of 2014 (E0.6
million for both prior year periods under review).Furthermore during the first nine months and the third quarter of 2014,
the Group incurred expenses of E0.6 million and E0.2 million (E0.2 millionand nil for the respective prior year periods)
and recorded other income for the first nine months and the third quarter of E5.1 million and E4.3 from joint ventures
(E0.9 million and E0.7 million in the prior-year periods). As at 26 September 2014, the Group owed E79.4 million (E63.6
million as at 31 December 2013) to, and was owed E13.0 million (E9.1 million as at 31 December 2013) by joint ventures.
There were no transactions between Coca-Cola HBC and the directors and senior management except for remuneration for the
period ended 26 September 2014, as well as the prior year period.
There were no other significant transactions with related parties for the period ended 26 September 2014.
18. Recent developments in Ukraine and the Russian Federation
We disclosed in our financial statements and annual report for the year ended 31 December 2013 information on the recent
events involving Ukraine and the Russian Federation, including those related to the Crimean peninsula, which have among
other things resulted in the depreciation of the Russian Ruble and the Ukrainian Hryvnia. The ongoing situation in Ukraine
and the Russian Federation, and any further economic sanctions that may be imposed on the Russian Federation by the US and
the European Union, could adversely affect the Group's operational and financial performance. We are continuously
monitoring developments in that region.
19. Subsequent events
Following the 26 September 2014 the Group incurred E3.6m of restructuring costs before tax, of which E1.4m, E1.8m and E0.4m
in its established, developing and emerging markets respectively.
On 27 October 2014, Brewmasters Holdings Ltd, subsidiary of Brewinvest S.A. joint venture with Heineken, sold its
participation in Zagorka A.D. to Heineken. The consideration for the Group amounted to E76.5 million. The transaction
resulted in a gain of E58.8 million, net of tax.
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