Solid Full-Year 2017 Revenue and Operating
Profit Growth, Strong Free Cash Flow Generation
Coca-Cola European Partners plc (CCEP) (ticker symbol: CCE)
today announces preliminary unaudited results for the
fourth-quarter and full-year ended 31 December 2017, and provides
full-year 2018 outlook.
Highlights
- Full-year diluted earnings per share
were €1.41 on a reported basis or €2.12 on a comparable basis,
including a negative currency translation impact of €0.04.
- Full-year reported revenue totalled
€11.1 billion, up 21.0 percent, or up 3.0 percent on a comparable
and fx-neutral basis. Volume was up 0.5 percent on a comparable
basis.
- Full-year reported operating profit
totalled €1.3 billion, or €1.5 billion on a comparable basis, up
9.0 percent, or up 10.5 percent on a comparable and fx-neutral
basis.
- Full-year free cash flow*
was €1.0 billion.
- Fourth-quarter diluted earnings per
share were €(0.13) on a reported basis or €0.49 on a comparable
basis, including a negligible impact from currency
translation.
- CCEP provides full-year guidance for
2018 including comparable and fx-neutral diluted earnings per share
growth of between 6 percent and 7 percent when compared to 2017
comparable results.
- CCEP remains on track to achieve
pre-tax savings of €315 million to €340 million through synergies
by mid-2019.
- CCEP completes post-merger
comparability adjustments related to final acquisition accounting
and provides revised comparable financial information and quarterly
phasing for 2016 and 2017 to reflect these adjustments. All
adjustments are non-cash.
- CCEP declares quarterly dividend of
€0.26 per share, an increase of approximately 24 percent.
* Refer to ‘Note Regarding the Presentation of Alternative
Performance Measures’ for further details about this measure.
“In our first full year as Coca-Cola European Partners, we have
started to realise the growth opportunities created by the merger
and, importantly, modestly exceeded our initial guidance for
revenue, operating profit, diluted earnings per share, and free
cash flow,” said Damian Gammell, Chief Executive Officer.
“Looking ahead, our journey continues in 2018 as we further
expand our portfolio, build on our commercial capabilities, and
continue to invest in our business to better serve our customers
and improve in-market execution,” Mr. Gammell said. “Though we face
some headwinds in 2018, we remain confident that our focus on
driving profitable growth and managing costs will strengthen our
business for the long term.
“Today’s dividend announcement, an increase of over 20 percent,
reflects our confidence in the future of our business and our goal
of generating cash and driving increased shareholder value,” Mr.
Gammell said.
Key Financial Measures
Unaudited, fx impact calculated by
recasting current year results at
prior
year rates
Fourth Quarter Ended 31 December 2017 € million
% change
As
Reported
Comparable Fx-Impact
As
Reported
Comparable Fx-Impact
Comparable
Fx-Neutral
Revenue 2,662 2,662 (20 ) 3.5 % 3.5 %
(0.5 )% 4.0 % Cost of sales 1,677 1,618 (12 ) 7.5 % 3.5 %
(0.5 )% 4.0 % Operating expenses 787 703 (6 ) (11.5 )% 0.5 % (0.5
)% 1.0 % Operating profit 198 341 (2 ) 50.0 % 9.5 % (0.5 )% 10.0 %
Profit after taxes (61 ) 240 (1 ) (608.5 )% 19.5 % (0.5 )% 20.0 %
Diluted earnings per share (€) (0.13 ) 0.49
— (750.0 )% 19.5 % (0.5
)% 20.0 %
Key Financial Measures
Unaudited, fx impact calculated by
recasting current year results at
prior
year rates
Year Ended 31 December 2017 € million
% change
As
Reported
Comparable Fx-Impact
As
Reported
Comparable Fx-Impact
Comparable
Fx-Neutral
Revenue 11,062 11,055 (142 ) 21.0 % 1.5 %
(1.5 )% 3.0 % Cost of sales 6,772 6,739 (85 ) 21.5 %
2.0 % (1.5 )% 3.5 % Operating expenses 3,030 2,838 (31 ) 12.5 %
(2.5 )% (1.0 )% (1.5 )% Operating profit 1,260 1,478 (26 ) 48.0 %
9.0 % (1.5 )% 10.5 % Profit after taxes 688 1,035 (19 ) 25.5 % 13.0
% (2.0 )% 15.0 % Diluted earnings per share (€) 1.41
2.12 (0.04 ) (0.5 )% 13.0
% (2.0 )% 15.0 %
Operational Review
Full-year 2017 diluted earnings per share were €1.41 on a
reported basis, or €2.12 on a comparable basis. Currency
translation had a negative impact of €0.04 on comparable diluted
earnings per share for the year-ended 31 December 2017. Full-year
reported operating profit totalled €1.3 billion, up 48.0 percent,
driven by the inclusion of Germany, Iberia, and Iceland. Comparable
operating profit was €1.5 billion, up 9.0 percent, or up 10.5
percent on a comparable and fx-neutral basis.
Fourth-quarter 2017 diluted earnings per share were €(0.13) on a
reported basis, or €0.49 on a comparable basis. Currency
translation had a negligible impact on fourth-quarter comparable
diluted earnings per share. Fourth-quarter reported operating
profit totalled €198 million, up 50.0 percent versus prior year.
Comparable operating profit was €341 million, up 9.5 percent, or up
10.0 percent on a comparable and fx-neutral basis.
Key operating factors for the full year include solid revenue
growth driven by revenue per case growth coupled with 0.5 percent
volume growth. Operating margins improved as we maintained gross
margin and as we continue to realise post-merger synergy benefits.
Fourth-quarter results also reflect the quarterly phasing of final
post-merger comparability adjustments. For a full reconciliation of
reported to comparable results, please refer to the Supplemental
Financial Information section.
Revenue
Full-year 2017 reported revenue totalled €11.1 billion, up 21.0
percent, or up 3.0 percent on a comparable and fx-neutral basis.
Revenue per unit case grew 2.5 percent on a comparable and
fx-neutral basis and volume increased 0.5 percent on a comparable
basis.
On a territory basis for full-year 2017, Iberia revenues were up
3.0 percent, and revenue in Germany was up 2.5
percent. Revenue in Great Britain grew 4.5 percent on an
fx-neutral basis, and on a reported basis, revenue declined 2.5
percent, driven by a decline of the British pound versus the euro.
Revenue in France was up 0.5 percent for the year, and revenue in
the Northern European territories (Belgium, Luxembourg, the
Netherlands, Norway, Sweden, and Iceland) was up 4.5 percent, led
by Belgium/Luxembourg and the Netherlands.
On a brand basis for full-year 2017, volume for sparkling brands
was up 0.5 percent. Coca-Cola trademark brands decreased 0.5
percent, with growth of approximately 15.0 percent in Coca-Cola
Zero Sugar offset by declines in other trademark brands. Sparkling
flavours and energy grew 4.0 percent with continued strong growth
in energy and solid growth in Fanta, Vio, and Royal Bliss. Still
brands increased 1.0 percent, and water brands were down 1.5
percent.
Fourth-quarter 2017 reported revenue totalled €2.7 billion, up
3.5 percent, or up 4.0 percent on a comparable and fx-neutral
basis. Revenue per unit case was up 3.0 percent on a comparable and
fx-neutral basis driven by favourable price, promotion and channel
mix. Fourth-quarter volume increased 0.5 percent on a
comparable basis, reflecting solid field sales execution and the
benefits of marketing and brand initiatives.
On a territory basis for fourth-quarter 2017, Iberia revenues
were up 3.0 percent, driven by both volume and revenue per unit
case growth, supported by favourable channel and package mix.
Revenue in Germany was up 6.5 percent, primarily driven by strong
revenue per unit case growth reflecting pricing and promotional
plans as well as favourable package and brand mix. Revenue in
Great Britain grew 1.5 percent on an fx-neutral basis with solid
gains in revenue per unit case partially offset by a decline in
volume reflecting an ongoing focus on promotional effectiveness and
efficiency. On a reported basis, Great Britain revenues were down
0.5 percent, driven by a decline of the British pound versus the
euro. Revenue in France was up 6.0 percent with growth in both
revenue per unit case and volume, driven by channel mix and solid
growth in Coca-Cola Zero Sugar. Revenue in the Northern European
territories (Belgium, Luxembourg, the Netherlands, Norway, Sweden,
and Iceland) was up 2.5 percent, led by Belgium/Luxembourg and the
Netherlands.
On a brand basis for fourth-quarter 2017, volume for sparkling
brands was up 1.0 percent. Coca-Cola trademark brands decreased 0.5
percent, with growth of 15.0 percent in Coca-Cola Zero Sugar offset
by declines in other trademark brands. Sparkling flavours and
energy grew 5.0 percent led by energy brands and Fanta. Still
brands increased 0.5 percent. Water brands were down 2.0 percent,
impacted by the discontinuation of select less profitable water
brands partially offset by solid growth from Aquabona in the
quarter. Juices, isotonics, and other were up 2.5 percent with
solid growth from Capri-Sun.
Cost of Sales
Full-year 2017 reported cost of sales were €6.8 billion, up 21.5
percent, driven by the inclusion of Germany, Iberia, and Iceland.
Comparable cost of sales was €6.7 billion, up 2.0 percent, or up
3.5 percent on a comparable and fx-neutral basis. Full-year cost of
sales per unit case increased 3.0 percent on a comparable and
fx-neutral basis, driven by channel, brand and package mix, and
manufacturing costs, as well as year-over-year cost increases in
key inputs, principally concentrate and sweetener. This was
partially offset by benefits from our synergy programmes.
Fourth-quarter 2017 reported cost of sales were €1.7 billion, up
7.5 percent. Comparable cost of sales was €1.6 billion, up 3.5
percent, or up 4.0 percent on a comparable and fx-neutral basis.
Fourth-quarter cost of sales per unit case increased 3.5 percent on
a comparable and fx-neutral basis, driven by channel, brand and
package mix, as well as year-over-year cost increases in key
inputs, principally concentrate, partially offset by benefits from
our synergy programmes.
Operating Expenses
Full-year 2017 reported operating expenses were €3.0 billion, up
12.5 percent, driven by the inclusion of Germany, Iberia, and
Iceland. Comparable operating expenses were €2.8 billion, down 2.5
percent, or down 1.5 percent on a comparable and fx-neutral
basis.
Fourth-quarter 2017 reported operating expenses were €787
million, down 11.5 percent. Comparable operating expenses were €703
million, up 0.5 percent, or up 1.0 percent on a comparable and
fx-neutral basis. This reflects volume related costs, timing,
and select investments partially offset by synergy benefits and a
continued focus on managing expenses.
Restructuring Charges
During the full-year 2017, we recognised restructuring charges
totalling €235 million. These charges principally relate to
proposed restructuring activities under our Integration and Synergy
Programme including those related to supply chain improvements such
as network optimisation, productivity initiatives, continued
facility rationalisation in Germany, end-to-end supply chain
organisational design, and cold drink operational practices and
facilities. Our proposed restructuring activities also include the
transfer of Germany and Iberia transactional related activities to
our shared services centre in Sofia, Bulgaria, streamlining of our
HR organisation, and other central function initiatives.
US Tax Reform
The US Tax Cuts and Jobs Act (the “Act”) was enacted on 22
December 2017 and represents a significant change to the US tax
code. Whilst CCEP is a UK listed and tax resident entity, it has a
number of subsidiaries outside the UK, including a US incorporated
holding company that is wholly owned by CCEP plc. Based on the
applicable provisions of the Act, during the fourth-quarter 2017,
we recorded a non-recurring book tax expense of €320 million, which
included an estimated book tax expense of approximately €125
million related to the transition from a worldwide to territorial
tax system and a reduction in deferred tax assets of approximately
€195 million primarily due to the elimination of foreign tax
credits. We do not currently expect an increase in cash taxes as a
result of any provision of the Act and while we continue to assess
the situation, at this stage, we do not anticipate any impact on
our effective tax rate going forward.
Outlook
For 2018, CCEP expects revenue growth in a low single-digit
range, with both operating profit and earnings per share growth of
between 6 percent and 7 percent. Each of these growth figures is on
a comparable and fx-neutral basis when compared to 2017 comparable
results. This revenue growth guidance excludes the accounting
impact of incremental soft drinks industry taxes. These taxes are
expected to add approximately 2 percent to 3 percent to revenue
growth and approximately 4 percent to cost of goods growth. At
recent rates, currency translation would have a negligible impact
on 2018 full-year diluted earnings per share.
CCEP expects 2018 free cash flow* in the range of €850 million
to €900 million, including the expected benefit from improved
working capital offset by the impact of restructuring and
integration costs. Capital expenditures are expected to be
approximately €525 million to €575 million, including approximately
€75 million of capital expenditures related to synergies.
Weighted-average cost of debt is expected to be approximately 2
percent. The comparable effective tax rate for 2018 is expected to
be approximately 25 percent.
CCEP remains on track to achieve pre-tax run-rate savings of
€315 million to €340 million through synergies by mid-2019.
Further, CCEP expects to have realised approximately 75 percent of
the target by year-end 2018. Restructuring cash costs to achieve
these synergies are expected to be approximately 2 1/4 times
expected savings and includes cash costs associated with
pre-transaction close accruals. Given these factors, currency
exchange rates, and our outlook for 2018, CCEP expects year-end net
debt to adjusted EBITDA* for 2018 to be towards the low-end of our
target range of 2.5 to 3 times. As a result, during 2018, CCEP
expects to continue to evaluate returning incremental cash to
shareholders.
* Refer to ‘Note Regarding the Presentation of Alternative
Performance Measures’ for further details about these measures.
Dividends
The CCEP Board of Directors declared a regular quarterly
dividend of €0.26 per share. The dividend is payable 15 March 2018
to those shareholders of record on 27 February 2018. The Company is
pursuing arrangements to pay the dividend in euros to shares held
within Euroclear Netherlands. Other publicly held shares will be
converted into an equivalent US dollar amount using exchange rates
issued by WM/Reuters taken at 16:00 GMT on 15 February. This
translated amount will be posted on our website, www.ccep.com,
under the Investor/Shareowner Information section.
Conference Call
CCEP will host a conference call with investors and analysts
today at 15:00 GMT, 16:00 CET, and 10:00 a.m. EST. The call can be
accessed through the Company’s website at www.ccep.com.
Financial Details
Financial details can be found in our full-year 2017 earnings
release on Form 6-K, available within the next 24 hours at
www.morningstar.co.uk/uk/NSM (located under effective date 31
December 2017) and available immediately on our website,
www.ccep.com, under the Investors tab. This document will include
comparable income statements for full-year 2017 and 2016, as well
as quarterly 2017 and 2016 income statements. There is also
additional supplemental financial information, such as volume and
per unit case data. The financial details included in this earnings
release and on Form 6-K are preliminary and unaudited.
About CCEP
Coca-Cola European Partners plc is a leading consumer goods
company in Western Europe, selling, making and distributing an
extensive range of non alcoholic ready-to-drink beverages and is
the world’s largest independent Coca-Cola bottler based on revenue.
Coca-Cola European Partners serves a consumer population of over
300 million across Western Europe, including Andorra, Belgium,
continental France, Germany, Great Britain, Iceland, Luxembourg,
Monaco, the Netherlands, Norway, Portugal, Spain and Sweden. The
Company is listed on Euronext Amsterdam, the New York Stock
Exchange, Euronext London and on the Spanish stock exchanges, and
trades under the symbol CCE. For more information about CCEP,
please visit our website at www.ccep.com and follow CCEP on Twitter
at @CocaColaEP.
Forward-Looking Statements
This document may contain statements, estimates or projections
that constitute “forward-looking statements” concerning the
financial condition, performance, results, strategy and objectives
of Coca-Cola European Partners plc and its subsidiaries (“CCEP”).
Generally, the words “believe,” “expect,” “intend,” “estimate,”
“anticipate,” “project,” “plan,” “seek,” “may,” “could,” “would,”
“should,” “might,” “will,” “forecast,” “outlook,” “guidance,”
“possible,” “potential,” “predict” and similar expressions identify
forward-looking statements, which generally are not historical in
nature. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from CCEP’s historical experience and its present expectations or
projections. These risks and uncertainties include, but are not
limited to, obesity concerns; water scarcity and poor quality;
evolving consumer preferences; increased competition and
capabilities in the marketplace; product safety and quality
concerns; perceived negative health consequences of certain
ingredients, such as non-nutritive sweeteners and
biotechnology-derived substances, and of other substances present
in CCEP’s beverage products or packaging materials; increased
demand for food products and decreased agricultural productivity;
changes in the retail landscape or the loss of key retail or
foodservice customers; fluctuations in foreign currency exchange
rates; fluctuations in the stability of the Euro; interest rate
increases; an inability of CCEP to maintain good relationships with
its partners; a deterioration in its partners’ financial condition;
increases in income tax rates, changes in income tax laws or
unfavourable resolution of tax matters; increased or new indirect
taxes in CCEP’s tax jurisdictions; increased cost, disruption of
supply or shortage of energy or fuels; increased cost, disruption
of supply or shortage of ingredients, other raw materials or
packaging materials; changes in laws and regulations relating to
beverage containers and packaging; significant additional labelling
or warning requirements or limitations on the availability of
CCEP’s products; an inability of CCEP to protect its information
systems against service interruption, misappropriation of data or
breaches of security; unfavourable general economic or political
conditions in Europe or elsewhere; the United Kingdom’s exit from
the European Union; litigation or legal proceedings; non-compliance
with anti-corruption laws and regulations and economic sanctions
programmes; adverse weather conditions; climate change; damage to
CCEP’s brand images and corporate reputation from negative
publicity, even if unwarranted, related to product safety or
quality, human and workplace rights, obesity or other issues;
changes in, or failure to comply with, the laws and regulations
applicable to CCEP’s products or business operations; changes in
accounting standards; an inability of CCEP to achieve its overall
long-term growth objectives; deterioration of global credit market
conditions; default by or failure of one or more of CCEP’s
counterparty financial institutions; fluctuations in CCEP’s debt
rating; an inability to timely implement any previously announced
actions to reinvigorate growth, or to realise the economic benefits
CCEP anticipates from these actions; failure to realise a
significant portion of the anticipated benefits of strategic
relationships, including (without limitation) The Coca-Cola
Company’s relationship with Monster Beverage Corporation; an
inability to renew collective bargaining agreements on satisfactory
terms, or CCEP or its partners experience strikes, work stoppages
or labour unrest; future impairment charges; an inability to
realise business integration and synergy savings; an inability to
successfully manage the possible negative consequences of
productivity initiatives; global or regional catastrophic events;
and other risks discussed in the reports CCEP files with the U.S.
Securities and Exchange Commission. Due to these risks and
uncertainties, CCEP’s actual future results, dividend payments, and
capital and leverage ratios may differ materially from the plans,
goals, expectations and guidance set out in CCEP’s forward-looking
statements. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made. CCEP
does not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise, except as required under applicable
rules, laws and regulations. CCEP assumes no responsibility for the
accuracy and completeness of any forward-looking statements. Any or
all of the forward-looking statements contained in this filing and
in any other of CCEP’s public statements may prove to be
incorrect.
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