Coca Cola European Partners about first Half of 2016

Coca Cola European Partners released the Interim Results for the Six Months Ended 1 July 2016 (link)

Earnings:

First-half diluted earnings per share were €0.74 on a reported basis or €0.83 on a pro forma comparable basis, including a negative currency translation impact of €0.02.

Revenue:

On a territory basis, Iberia revenues were up 1.5 per cent, as revenue per unit case increased ahead of volume. Revenue in Germany declined 0.5 per cent, in part due to the impact of a transition to recyclable PET from returnable PET.

Great Britain revenues were down 10.5 per cent, driven by the negative impact of an approximately 6.0 per cent decline for the British pound versus the Euro …

Revenue in France declined 4.5 per cent, …

I will watch this. I hope the revenue-decline isn’t becoming a trend.

 

Costs:

Pro forma comparable cost of sales totaled €3.3 billion, down 3.5 per cent, or down 2.0 per cent on a pro forma comparable and fx-neutral basis.

For 2016, CCEP expects revenue to be flat with operating profit growth in a modest mid-single-digit range and diluted earnings per share in a mid-teen range, all on a comparable and fx-neutral basis.

I like that they lowered their costs.

 

Dividends:

Board has approved an initial quarterly dividend of €0.17, equivalent to an annualised dividend of €0.68 per share

I expected 0,72 €Dividend for 2016 (link), I hope they will catch up with my expectations till 2019.

 

Share Buybacks:

No statement

 

Bottom Line:

For the time being I see nothing alarming here. I realy don’t like the revenue decline and will watch this to ensure that I don’t missed some issues/problems. Also I will track their success with cost cutting though synergies. It’s the first report of them as a combined company, I’m looking forward to their first annual report.

 

___

From my 3. June 2016 Post:

This is my final calculation:

CCEP_spread3.PNG

In this calculation I assumed that:

  • Revenue, EBITDA & Income will stay flat
  • Synergies ($350mn) will unfold in 2019
  • Tax Rate 28%
  • Debt will be at 3,5x EBITDA, 2% interests rate
  • Shares outstanding stay flat

 

I have not adjusted:

  • Revenue and EBIT – maybe there is some (single digit) growth
  • Tax Rate – maybe tax loopholes in Europe will be closed
  • No FX adjustments
  • No share buybacks, note: Coca-Cola Enterprises was a big canibal (~25% in 5 years) maybe CCEP will be too

You can finde some EPS numbers from CCEP in this presentation (link)

Advertisements

11 thoughts on “Coca Cola European Partners about first Half of 2016

  1. Thanks for your update. To be honest, I don’t get your investment thesis on Coca Cola European partners. The stock doesn’t look cheap – more or less fairly priced for the quality it offers. I don’t see a big chance of growth, as there is a change to more healthy drinks. So what is is, that I don’t get?

    Like

    • Hi ebdem,
      Thanks for asking 

      I have not considered any revenue growth and share buybacks.
      I think the combination of the companies makes totally sense – geographically and businesswise. It would be hard to name a merger that makes more sense. So I think the synergies will unfold.

      Without any revenue growth and share buybacks I will have a stable and established business at a P/E of 12,6 in 2019 (as long as the integration works out).
      When the market crashes I think they will suffer less – and since I secretly believe they will buy back some shares I have a “margin of safety” here.

      Healthy drinks also need to be bottled I guess.
      CCEP is at the moment a small position in my portfolio.

      I hope this makes sense.

      Like

  2. Back again on Coca Cola European Partners. It recently dropped again in price, but there seems to be no real problem in the business model, or? The CEO change was the reason for the drop or do you see anything else?

    Like

    • “For 2016, CCEP expects revenue growth to be flat, with operating profit growth in a modest mid-single-digit range and mid-teens diluted earnings per share growth. Each of these items are on a pro forma comparable and fx-neutral basis. Pro forma comparable diluted earnings per share is expected in a range of 1.86 to €1.90, including negative currency
      translation impact of approximately 4.5per cent. ”

      I don’t see a big problem an am looking forward to their first Annual Report 😉

      Maybe its this:

      Great Britain revenues were down 13.0per cent, driven primarily by volume growth and favourable weather, offset by a 16 per cent decline of the British pound vs. the Euro.

      https://www.ccep.com/system/file_resources/1471/2016_CCEP_Third-Quarter_Financial_Report_FINAL.pdf

      Like

    • Sorry it took me so long to answer.
      Yes, they expect a pro forma* EPS around 2 € for 2016 (1,86 – 1,90€)
      … this would lead to a PE-Ratio of 16,2 today.

      *pro forma is for the whole Company CCE, Germany, Iberian, without merger costs …

      Like

  3. Thanks for the reply! So the underlying business seems quite cheap at a PE of 16 today and 13 in 2019. Besides that I am not sure whats the right multiple for the business. It’s not growing, but offers an EAT-margin of 8-10%.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s