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European Coke bottler Coca-Cola HBC (CCH) has increased sales in the first half to expand margins and push up profits but unseasonable weather affected volumes in its established markets and currency volatility continued to cause problems.
Sales grew 2.4% on a currency neutral basis to €3bn in the six months to 1 July and revenue per case was 2.4% up at €3.02, mainly due to better pricing trends and an improvement in package mix.
Volume increased marginally by 0.1% on a strong prior year to just more than 1 billion cases. Volume in the established markets declined by 2.8%, partly impacted by unseasonably cool weather, but developing segments demonstrated good volume growth momentum with all key categories contributing to the 3.5% growth.
Nigeria, Romania and Serbia were key drivers of the 0.5% volume growth in the emerging markets segment, which continued to be negatively impacted by Russia
However, currency volatility pushed revenues down -3.4% and sales per case down -3.5%.
Cost efficiencies pushed down operating expenses and favourable input costs helped offset the adverse currency impact and improve EBIT margin by 90 basis points to 7.2%.
Operating profits rose 10.8% to €220.6m and net profit increased 11.8% to € 140 as a result.
CEO Dimitris Lois said: “We are pleased with the strong performance in the first half of the year. The business delivered robust revenue growth and significant margin expansion, driven by improved pricing and mix trends, good progress on operating costs and a favourable input cost environment.
“We remain confident that 2016 will be another year of currency-neutral revenue and operating margin growth.”
Morning update
Steinhoff has upped its offer for Poundland (PLND) by 5p to 225p a share after US hedge fund Elliott Capital built up a 17.5% in recent weeks to put pressure on the South African retail giant. The new and final offer is made up of 225p in cash for each share and another 2p dividend to value the discount chain at £610.4m. It pushes up the initial offer accepted by the Poundland board from 220p to 227p. Activist fund Elliott Capital had built its stake to be big enough to block the Steinhoff deal if it wanted, forcing the acquisitive retailer to up its offer. The new offer represents a 43.4% premium to the closing price of Poundland shares of 158.3p on 13 June, the day prior to interest from Poundland emerging and a 15.8% premium to 196p price on day before the offer.
Poundland chairman Darren Shapland said: “The Poundland board is pleased to recommend Steinhoff’s increased all-cash offer which presents Poundland shareholders with an opportunity to realise their shareholding at an improved price and on an enhanced premium to Poundland’s undisturbed share price. Steinhoff is a well-capitalised, international business with a clear and proven commitment to value retailing. Steinhoff continues to share our vision for the growth and expansion of Poundland and, as such, we believe they are a suitable and appropriate partner for our colleagues, suppliers and stakeholders.”
Steinhoff CEO Markus Jooste added: “As a group Steinhoff invests in businesses where it sees opportunities to deliver attractive returns to its own shareholders. We believe there is significant merit to both Poundland and Steinhoff in bringing Poundland into our global operations, and the Steinhoff directors and management are enthusiastic about the related opportunities that will arise.”
Shares in Poundland are down 1% this morning to 221.8p.
Soft drinks group Refresco (RFRG) has increased sales in the second quarter to €558.7m, more than €10m higher than the same period a year ago, as volumes rose 1.9% to 1.7bn litres. Co-packing volumes in the three months to the end of June increased 18.8% and made up 25% of the total, with private label volume falling 2.8%. Adjusted EBITDA increased to €68.3m, up from €67.6m in the second quarter of 2015.
CEO Hans Roelofs said: “The unfavourable weather conditions throughout Europe and continued pressure on the private label market have created a challenging environment for Refresco to grow volumes while keeping margins at a sustainable level.
“Even though we gained some private label volumes, the impact of our earlier decision to discontinue low margin-large volume contracts, mainly in water and carbonated soft drinks, was still visible in the second quarter. Mainly driven by the recent DIS acquisition, co-packing volumes continued to develop favourably during the quarter. Looking ahead, the third quarter had a soft start due to the poor summer weather and continued challenging market conditions for private label affecting our volumes in July. Therefore, we expect volumes this year to be below our medium term guidance.
“We are well on track to complete the acquisition of US-based Whitlock Packaging, which was announced in July and we expect to complete the transaction in September. It is our first step beyond Europe and the start of creating a second growth platform with value creating opportunities similar to what we have in Europe.”
Shares in the group fell 3.6% to €13.56 on the warning of the poor start to the second half.
Bakkavor announced strong revenue growth across the group in the second quarter, up 3.2% to £438.7m – up 3.6% on a like-for-like basis. Adjusted EBITDA was up 18% to €41.4m reflecting volume benefits, cost control and productivity improvements.
CEO Agust Gudmundsson said: “I am pleased to report another excellent set of results for the group, with both strong revenue and EBITDA growth across our businesses. Although the UK is entering a period of some economic uncertainty following the recent EU referendum, we believe we are well placed to manage the challenges that may lie ahead. We are therefore planning to continue our accelerated capital investment programme to support our ongoing growth with key customers and drive further performance benefits.”
Yesterday in the City
B&M European Value Retail (BME) was lifted by a note from investment bank yesterday indicating a 15% potential upside to the current price. Analyst Wayne Brown said B&M was one of the highest-quality names in the retail landscape. “It has a superior disruptive multi-price model which should, in a period of uncertainty, lead to out-performance,” he added. Shares got a 3.7% bump as a result.
Ocado (OCDO) was freshened another 3.4% to 305.1p as the City weighed up who got the better end of a renewed deal with Morrisons. The online grocer is now up almost 17% this week, completely wiping out losses in the year to date. Morrisons (MRW) hit its peak yesterday and dipped off 0.1% to 191.2p.
The FTSE 100 chalked up its fifth consecutive day of gains as financial stocked buoyed the blue-chip index. It finished the day up 0.2% to 6,866.42 points – 1% (or 70 points) up for the week.
Faller included Cranswick (CWK), TATE & Lyle (TATE) and PZ Cussons (PZC), down 1.4% to 2,333p, 1.2% to 724p and 0.9% to 349.1p.
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