Coca-Cola Hellenic hit by perfect political and economic storm

By Ben Bouckley

- Last updated on GMT

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Coca-Cola Hellenic hit by perfect political and economic storm
Economic and political uncertainty across its markets and ‘persistent’ input cost pressures have hit Coca-Cola Hellenic's first quarter results, with volume sale declines of two per cent and significant losses for the quarter.

The Greek-headquartered company – one of Coca-Cola’s largest bottlers, active in 28 countries across Europe and Africa – reported net sales revenue of €1.437bn for the three months to March 30 2012 (€1.416bn: Q1 2011), but CCH published a net loss of €19m for the first quarter (€1m loss Q1 2011).

CEO Dimitris Lois said: “We managed to deliver revenue growth ahead of volume performance amidst a challenging external environment, with currency neutral net sales revenue per unit case growth of 3%, excluding the hyperinflation impact of Belarus.”

Greek plants shut

Within established markets (€614m sales Q1 2012) unit case volume fell 2% year-on-year driven primarily by problems in Greece, where CCH said it was forced to close two of its seven plants in February.

“Operating profit [EBIT] in the established markets segment reached €18m in Q1, primarily as a result of reduced profitability in Greece. Increased raw material costs, lower volume and higher operating expenses drove the decline in profitability,”​ the company said.

“Volume in Greece declined in the high teens in the first quarter as we still cycle the implementation of the last wave of austerity measures in the second half of 2011 including the increase in VAT.”

Despite mid single-digit volume growth in Italy – driven by a 23% increase in Coca-Cola Zero and single-digit growth for tea and waters – volumes in Switzerland fell in low single-digits due to the strong Swiss Franc hitting tourist spending via immediate consumption channels.

High sugar prices

Irish volumes also fell due to high unemployment (expected to hit 15% in 2012) despite Coca-Cola Zero growth in the low teens and single-digit Fanta growth.

Within developing markets (€229.2m sales) volume sales were flat and net revenues fell 2%, with single-digit volume growth in Poland, Hungary offset by a slump in the Czech Republic and higher commodity costs, principally in sugar.

Emerging markets performed little better (3% volume declines year-on-year) mainly due to lower sales in Nigeria and Ukraine, although net sales revenue grew 6% and volume increases in Russia.

Continuous political and social instability in Northern Nigeria, nationwide strikes in January and a government decision to scrap fuel subsidies (hitting disposal income) hit sales here.

Meanwhile, volumes in the Ukraine also fell double-digits due to extremely cold weather and declining consumer confidence, and not even CCH's marketing push around Euro 2012 (the forthcoming soccer championship) saved Coca-Cola products there from single-digit declines.

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