Coca-Cola European Partners plc (CCEP) (ticker symbol: CCE)
today announces fourth-quarter and full-year results for the period
ended 31 December 2016, and affirms its full-year 2017
outlook.
Highlights
- Full-year diluted earnings per share
were €1.42 on a reported basis or €1.92 on a pro forma comparable
basis, including a negative currency translation impact of
€0.08.
- Full-year reported revenue totalled
€9.1 billion. Pro forma comparable revenue was €10.9 billion, down
1.5 percent vs. prior year, or up 1.0 percent on a pro forma
comparable and fx-neutral basis. Volume increased 0.5 percent on a
pro forma comparable basis.
- Full-year reported operating profit
was €851 million; pro forma comparable operating profit was €1.4
billion, up 1.0 percent, or up 5.0 percent on a pro forma
comparable and fx-neutral basis.
- Fourth-quarter diluted earnings per
share were €0.02 on a reported basis or €0.43 on a pro forma
comparable basis, including a negative currency translation impact
of €0.03.
- CCEP affirms its full-year guidance
for 2017 including comparable and fx-neutral diluted earnings per
share growth in a high single-digit range when compared to the 2016
pro forma comparable results; at recent rates, currency translation
would reduce diluted earnings per share by approximately 2.0
percent.
- CCEP remains on track to achieve
pre-tax savings of €315 million to €340 million through synergies
by mid-2019.
- CCEP declares quarterly dividend of
€0.21 per share.
“During 2016, we successfully brought together the businesses of
Coca-Cola European Partners, while delivering our growth objectives
for revenue, profit, and diluted earnings per share,” said Chief
Executive Officer Damian Gammell. “This transaction, completed only
10 months ago, establishes an improved platform for growth as we
diversify and increase our portfolio value, collaborate to win with
our customers, and operate more efficiently, effectively, and
locally to capture the market opportunities.
“As we worked to integrate our business in 2016, our company
remained focused on driving core revenue, operating profit, and
improving profit margins,” Mr. Gammell said. “These results were
driven by strong field level execution by our employees, solid
marketing initiatives, and the benefits of improved weather in key
months.
“Going forward, we will focus on delivering our operating
objectives for 2017 - goals we have affirmed today - by
successfully implementing our marketing and brand initiatives and
continuing to realize our synergy objectives,” Mr. Gammell said.
“We believe the operating advantages of our new company, coupled
with the skill and dedication of our people, will enable us to
deliver consistent, value-building growth that creates benefits for
our stakeholders and drives shareholder value.
“Today’s dividend announcement, an increase of over 20 percent,
is a clear demonstration of our strong commitment to driving
shareholder value,” Mr. Gammell said.
Note Regarding the Presentation of
Financial Information
Unless otherwise noted, the financial information included in
this release is provided on a pro forma comparable basis to allow
investors to better analyse CCEP’s business performance and allow
for greater comparability. To do so, we have given effect to the
Merger as if it had occurred at the beginning of the periods
presented, thereby including the financial results of Coca-Cola
Enterprises, Inc. (“CCE”), Coca-Cola Erfrischungsgetränke GmbH
(“Germany,” “CCEG”) and Coca-Cola Iberian Partners S.A.U.
(“Iberia,” “CCIP”) and acquisition accounting adjustments for the
full periods presented. We have also excluded items affecting the
comparability of year-over-year financial performance, including
merger and integration costs, restructuring costs, the
out-of-period mark-to-market impact of hedges and the inventory
step-up related to acquisition accounting. See the Supplementary
Financial Information for a full reconciliation of our reported
results to our pro forma comparable results.
For purposes of this review, the following terms are defined as
follows:
‘As reported’ includes the financial results of CCE only,
as the accounting predecessor, for all periods prior to 27 May 2016
and combined CCEP (CCE, Germany and Iberia) for the period from 28
May 2016 through 31 December 2016.
‘Pro forma’ includes the results of CCE, Germany and
Iberia as well as the impact of the additional debt financing costs
incurred by CCEP in connection with the Merger for all periods
presented, as if the Merger had occurred at the beginning of the
period presented.
‘Pro forma Comparable’ represents the pro forma results
excluding the items impacting comparability during the periods
presented for CCE, Germany and Iberia.
‘Fx-Neutral’ represents the pro forma comparable results
excluding the impact of foreign exchange rate changes during the
periods presented.
Key Financial Measures
Unaudited, FX impact calculated by
recasting current year results at prior year rates
Fourth Quarter Ended 31 December 2016
€ million % change
As
Reported
Pro forma
Comparable
Fx-Impact
As
Reported
Pro forma
Comparable
Fx-Impact
Pro forma
Comparable
Fx-Neutral
Revenue 2,578 2,578 (101 ) 73.0 %
— % (4.0)% 4.0 % Cost of
sales 1,559 1,560 (59 ) 65.0 % — % (3.5)% 3.5 % Operating expenses
887 691 (24 ) 124.0 % (2.5 )% (4.0)% 1.5 % Operating profit 132 327
(18 ) (12.0 )% 7.0 % (6.0)% 13.0 % Profit after taxes 12 212 (14 )
(91.0 )% 18.5 % (7.5)% 26.0 % Diluted earnings per share (€)
0.02 0.43
(0.03 ) (96.5 )% 16.0 %
(10.0)% 26.0 %
Key Financial Measures
Unaudited, FX impact calculated by
recasting current year results at prior year rates
Year Ended 31 December 2016 €
million % change
As
Reported
Pro forma
Comparable
Fx-Impact
As
Reported
Pro forma
Comparable
Fx-Impact
Pro forma
Comparable
Fx-Neutral
Revenue 9,133 10,865 (288 ) 44.5 %
(1.5 )% (2.5 )% 1.0 % Cost of
sales 5,584 6,575 (171 ) 39.0 % (2.0 )% (2.5 )% 0.5 % Operating
expenses 2,698 2,901 (66 ) 73.5 % (2.0 )% (2.5 )% 0.5 % Operating
profit 851 1,389 (51 ) 12.0 % 1.0 % (4.0 )% 5.0 % Profit after
taxes 549 938 (39 ) 6.5 % 13.0 % (4.5 )% 17.5 % Diluted earnings
per share (€) 1.42 1.92
(0.08 ) (35.0 )%
13.0 % (4.5 )% 17.5 %
Operational Review
CCEP reported full-year 2016 diluted earnings per share of
€1.42, or €1.92 on a pro forma comparable basis. Currency
translation had a negative impact of approximately €0.08 on
full-year pro forma comparable diluted earnings per share.
Full-year 2016 reported operating profit totalled €851 million, up
12.0 percent vs. prior year, reflecting the inclusion of Germany
and Iberia in 2016. Pro forma comparable operating profit was €1.4
billion, up 1.0 percent, or up 5.0 percent on a pro forma
comparable and fx-neutral basis.
Fourth-quarter reported 2016 diluted earnings per share were
€0.02, or €0.43 on a comparable basis. Currency translation had a
negative impact of approximately €0.03 on fourth-quarter comparable
diluted earnings per share. Fourth-quarter 2016 reported operating
profit totalled €132 million, down 12.0 percent vs. prior year,
reflecting the inclusion of Germany and Iberia, offset by
restructuring charges recorded in the fourth quarter of 2016. Pro
forma comparable operating profit was €327 million, up 7.0 percent,
or up 13.0 percent on a pro forma comparable and fx-neutral
basis.
Key operating factors in the fourth-quarter included modest
price/mix per case growth that was slightly ahead of cost of sales
per case growth, coupled with a 1.5 percent increase in volume, one
additional selling day in fourth-quarter 2016, and post-merger
synergy benefits, all partially offset by the impact of a
sustained, challenging consumer environment.
Revenue
Full-year reported revenue totalled €9.1 billion, up 44.5
percent, driven by the inclusion of Germany and Iberia in
2016. Pro forma comparable revenue was €10.9 billion, down 1.5
percent, or up 1.0 percent on a pro forma comparable and fx-neutral
basis. Revenue per unit case grew 0.5 percent on a pro forma
comparable and fx-neutral basis. Volume increased 0.5 percent
on a pro forma comparable basis.
Fourth-quarter reported revenue totalled €2.6 billion, up 73.0
percent, driven by the inclusion of Germany and Iberia in 2016. Pro
forma comparable revenue was €2.6 billion, flat vs. prior year, or
up 4.0 percent on a pro forma comparable and fx-neutral basis.
Revenue per unit case was up 1.5 percent on a pro forma comparable
and fx-neutral basis. Volume increased 2.5 percent on a pro forma
basis, or increased 1.5 percent on a pro forma comparable basis
after adjusting for one additional selling day in the fourth
quarter of 2016.
On a territory basis for the fourth quarter, Iberia revenues
were up 8.0 percent benefiting from strong growth of Coca-Cola Zero
Sugar and the addition of Monster brands, with both revenue per
unit case and volume growth. Revenue in Germany declined 1.5
percent, reflecting the impact of promotional plans and negative
channel mix with growth in the home channel and declines in the
cold channel, all partially offset by positive volume
growth. Great Britain revenues were down 14.0 percent, as
solid gains in both price/mix and volume growth were not enough to
offset a 17.0 percent decline of the British pound vs. the Euro.
Revenue in France grew 3.5 percent, primarily due to favourable
price/mix and flat volume growth driven by promotional timing.
Revenue in the Northern European territories (Belgium/Luxembourg,
Iceland, the Netherlands, Norway and Sweden) grew approximately 7.5
percent led by solid growth in Belgium/Luxembourg, the Netherlands
and Norway and the inclusion of Iceland. These figures also
include the benefit of one additional selling day during the fourth
quarter of 2016 when compared to the prior year fourth quarter.
As for volume, total full-year 2016 volume grew 0.5 percent on a
pro forma basis and 0.5 percent on a pro forma comparable basis as
the one fewer selling day in the first quarter was offset by the
one additional selling day in the fourth quarter. A challenging
consumer environment, improved weather in key selling months, and
other operating factors highlighted above, combined to limit volume
results.
Full-year sparkling brands grew 0.5 percent. Coca-Cola trademark
declined approximately 1.0 percent, with approximately 10.0 percent
growth in Coca-Cola Zero Sugar, offset by declines in other
trademark brands. Sparkling flavors and energy grew 5.0 percent
with continued strong growth in energy and solid growth in Fanta,
Vio Bio sparkling, and Sprite. Energy is benefiting from
year-over-year comparisons as we have not yet lapped the newly
acquired distribution of Monster in Germany and Spain. Still
brands grew 2.0 percent with water brands up 3.5 percent benefiting
from Smartwater, Vio, Chaudfontaine and Aquabona. All other stills
were flat as solid growth in teas and sports drinks were offset by
declines in fruit and juice drinks.
Fourth-quarter comparable volume grew 1.5 percent on a pro forma
basis after adjusting for one additional selling day. Sparkling
brands grew 1.5 percent led by Coca-Cola Zero Sugar growth of
approximately 13.5 percent. Sparkling flavors and energy grew 3.0
percent with solid growth in energy brands and Fanta. Still brands
declined 0.5 percent with water up almost 2.0 percent, and all
other still beverages were down 2.0 percent as growth in teas and
sports drinks did not fully offset declines in fruit and juice
drinks.
Cost of Sales
Full-year 2016 reported cost of sales totalled €5.6 billion, up
39.0 percent vs. prior year, driven by the inclusion of Germany and
Iberia in 2016. Pro forma comparable cost of sales totalled €6.6
billion, down 2.0 percent vs. prior year, or up 0.5 percent on a
pro forma comparable and fx-neutral basis driven in part by 0.5
percent reported volume growth. Full-year cost of sales per unit
case was flat on a pro forma comparable and fx-neutral basis. This
reflects the year-over-year impact of mix, the increase in
commodity costs, notably sweetener and PET, partially offset by an
overall net modest decline in all other cost of sales.
Fourth-quarter 2016 reported cost of sales totalled €1.6
billion, up 65.0 percent vs. prior year, driven by the inclusion of
Germany and Iberia in 2016. Pro forma comparable cost of sales
totalled €1.6 billion, flat vs. prior year, or up 3.5 percent on a
pro forma comparable and fx-neutral basis driven by 2.5 percent pro
forma volume growth. Pro forma comparable volume grew 1.5 percent
after adjusting for an extra selling day in the fourth quarter.
Fourth-quarter cost of sales per unit case increased 1.0 percent on
a pro forma comparable and fx-neutral basis.
Operating Expense
Full-year 2016 reported operating expenses totalled €2.7
billion, up 73.5 percent vs. prior year, reflecting the inclusion
of Germany and Iberia in 2016. Pro forma comparable operating
expenses were €2.9 billion, down 2.0 percent, or up 0.5 percent on
a pro forma comparable and fx-neutral basis. This includes the
impact of volume growth and wage inflation, partially offset by the
benefits of restructuring.
Fourth-quarter 2016 reported operating expenses totalled €887
million, up 124.0 percent vs. prior year, reflecting the inclusion
of Germany and Iberia in 2016. Pro forma comparable operating
expenses were €691 million, down 2.5 percent, or up 1.5 percent on
a pro forma comparable and fx-neutral basis. This includes the
impact of volume growth and one additional selling day, partially
offset by the benefits of restructuring.
Restructuring Charges
During the fourth quarter of 2016, the Company recorded €162
million in restructuring charges principally related to
restructuring proposals announced in October 2016, including those
related to further supply chain improvements including network
optimisation, productivity initiatives, continued facility
rationalisation in Germany, and end-to-end supply chain
organisational design. These announcements also include
transferring of Germany transactional related activities to the
Company’s shared services centre in Bulgaria, and other central
function initiatives.
During the full-year 2016, on a pro forma comparable basis, the
Company recognized restructuring charges of €560 million, which
includes amounts related to Germany and Iberia in-flight
initiatives prior to the Merger. This included €300 million of
pre-merger charges, €45 million of post-merger charges during the
first half of 2016, and €215 million of post-merger charges during
the second half of 2016. At the time of the Merger, the
Company assumed provisions related to ongoing restructuring
initiatives in Germany of approximately €228 million.
Outlook
For 2017, CCEP affirms prior guidance, including expectations of
modest low single-digit revenue growth, with operating profit and
diluted earnings per share growth to be up high single-digits.
Excluding synergies, CCEP expects core operating profit growth to
modestly exceed revenue growth. Each of these growth figures are on
a comparable and fx-neutral basis when compared to the 2016 pro
forma comparable results. At recent rates, currency translation
would reduce 2017 full-year diluted earnings per share by
approximately 2.0 percent.
The Company expects 2017 free cash flow in a range of €700
million to €800 million, including the expected benefit from
improved working capital offset by the impact of restructuring and
integration costs. Capital expenditures are expected to be in a
range of €575 million to €625 million, including €75 million to
€100 million of capital expenditures related to synergies.
Weighted-average cost of debt is expected to be approximately 2.0
percent. The comparable effective tax rate for 2017 is expected to
be in a range of 24 percent to 26 percent. CCEP does not expect to
repurchase shares in 2017.
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 exit 2017 with run-rate savings of
approximately one-half of the target. 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 2017, CCEP expects year-end net
debt to EBITDA for 2017 to be under 3 times.
Dividends
The CCEP Board of Directors declared a regular quarterly
dividend of €0.21 per share. The dividend is payable 24 April 2017
to those shareholders of record on 10 April 2017. 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 21 March 2017. 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 14:00 GMT, 15:00 CET and 10:00 a.m. EDT. 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 2016 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 2016) and available immediately on our website,
www.ccep.com, under the Investors tab. This document will include
pro forma and comparable income statements for full-year 2015 and
2016, as well as quarterly 2015 and 2016 income statements. There
is also additional supplemental financial information, such as
volume and per unit case data. Additionally, there are pro forma
and comparable quarterly income statements.
Formation of Coca-Cola European Partners plc
CCEP was formed on 28 May 2016 through the combination of CCE,
CCIP and CCEG. CCEP is a publicly traded UK domiciled company
listed on the Euronext Amsterdam, New York Stock Exchange, Euronext
London and various Spanish stock exchanges (ticker symbol: CCE).
CCEP is the world’s largest independent Coca-Cola bottler based on
revenue and serves over 300 million consumers across Western
Europe, including Andorra, Belgium, continental France, Germany,
Great Britain, Luxembourg, Monaco, the Netherlands, Norway,
Portugal, Spain and Sweden. Subsequent to the close of the merger,
CCEP acquired Vifilfell, the Icelandic Coca-Cola bottler per the
terms of the Merger agreement. With pro forma 2016 revenue of
approximately €10.9 billion and pro forma comparable 2016 operating
profit of approximately €1.4 billion, CCEP is a leading consumer
packaged goods company in Europe.
CCEP represents the combination of three strong Coca-Cola
bottlers, each with their own unique strengths, operating
approaches and best practices. To capitalise on these individual
strengths and capture the synergies created by the combination we
are focused on developing new ways of operating. We are in the
early stages of this work and it will take some time to complete;
however, we are committed to delivering the full benefit of the
synergies associated with the formation of CCEP and have already
begun to share best practices across the organisation. While going
through this transformation, we will continue to make the
appropriate level of investment in key marketing initiatives that
support business development and will seek to optimise the return
on our capital investment.
CCEP also remains committed to doing business sustainably and
responsibly in the way it creates shareholder value. In 2016, CCEP
was listed on both the Dow Jones Sustainability Europe and World
Indices, having achieved the highest score of 100 in Brand
Management, Health and Nutrition, Materiality, Environmental
Reporting, Packaging, and Water Related Risks. The Carbon
Disclosure Project also included CCEP in its 2016 Climate A and
Water A lists, which recognises companies who are leading the way
in sustainable water, climate and carbon management.
As The Coca-Cola Company’s (“TCCC”) strategic bottling partner
in Western Europe and one of the world’s largest independent
Coca-Cola bottlers, we also believe the creation of CCEP will drive
a new level of partnership with TCCC. We and TCCC understand that
winning in the marketplace requires us to act with a common vision,
one that includes clearly aligned growth targets, common priorities
and a commitment to execute seamlessly together. Our shared vision
requires aligned commitments to continuously develop our brands,
assets and capabilities to maximise performance and value.
About CCEP
Coca-Cola European Partners plc (CCEP) is a leading consumer
packaged goods company in Europe, selling, making and distributing
an extensive range of nonalcoholic 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.” 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 Coca-Cola European Partners plc’s (“CCEP”) historical
experience and its present expectations or projections. These risks
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 their 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;
interest rate increases; an inability 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 its 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 labeling or warning requirements or
limitations on the availability of its respective products; an
inability to protect its respective information systems against
service interruption, misappropriation of data or breaches of
security; unfavourable general economic or political conditions in
the United States, Europe or elsewhere; litigation or legal
proceedings; adverse weather conditions; climate change; damage to
its respective 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 its respective products or business operations;
changes in accounting standards; an inability to achieve its
respective overall long-term growth objectives; deterioration of
global credit market conditions; default by or failure of one or
more of its respective counterparty financial institutions; an
inability to timely implement their previously announced actions to
reinvigorate growth, or to realise the economic benefits it
anticipates from these actions; failure to realise a significant
portion of the anticipated benefits of its respective 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 it or its respective partners experience strikes, work
stoppages or labour unrest; future impairment charges; an inability
to successfully manage the possible negative consequences of its
respective productivity initiatives; global or regional
catastrophic events; and other risks discussed in the CCEP
prospectus approved by the UK Listing Authority and published on 25
May 2016, the registration statement on Form F-4, which was filed
with the SEC by CCEP, and the interim results for the first six
months ended 1 July 2016, published on 22 September 2016. 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. 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 its public statements may prove to be
incorrect.
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Coca-Cola European Partners plcInvestor
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Relations:Ros Hunt, +44 (0) 7528 251 022
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