Coca-Cola HBC AG (CCH) Earnings Call Transcript & Summary

Thank you for standing by, ladies and gentlemen, and welcome to Coca-Cola HBC's Conference Call to discuss the acquisition of CCBA and Third Quarter 2025 Trading Update. [Operator Instructions] I must also advise that this conference is being recorded today, Tuesday, October 21, 2025. I will now pass the floor to one of your speakers, Jemima Benstead, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining the call at short notice. I'm here with our CEO, Zoran Bogdanovic; and our CFO, Anastasis Stamoulis. We have just over an hour for the call today, and following the prepared remarks, we will turn the call over to your questions. Please keep to one question and one follow-up, waiting for us to answer the first question before moving to your follow-up. I would like to remind you that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements in our results press release this morning and at the end of our slide deck. With that, I will turn the call over to Zoran.

Thank you, Jemima. Good morning, everyone, and thank you for joining the call at short notice today. This is a very exciting moment for us at Coca-Cola HBC and a huge milestone in our growth story. Today, I'm delighted to announce the acquisition of Coca-Cola Beverages Africa, or CCBA, the largest Coca-Cola bottler in Africa. CCBA is a fantastic business, and I'm convinced this will be a strong combination. I want to leave you with 3 headlines before getting into the detail. First, with this acquisition, we are creating the second largest Coca-Cola bottling partner by volume globally, with leading positions across 43 markets in Africa and Europe. Second, we believe this acquisition presents a highly compelling strategic rationale which, at its core, is about growth. CCBA operates across very attractive markets, and we see outstanding potential to further drive long-term growth in Africa and create value for stakeholders, and I'll share more detail a bit later. And third, we will be combining the expertise of 2 leading companies with strong track record of growth and deep commitments to investing in talent and local communities. And speaking of talent, I want to take this moment to say thank you to all the people involved in getting us to this point. Today's announcement is the culmination of a lot of hard work and commitment of so many passionate people, years of strong committed work focused on driving growth, winning in the market, building strong capabilities and talent pipeline have enabled this milestone, and certainly, strong trusted partnership with the Coca-Cola Company. So truly a big thank you to our teams and the Coca-Cola Company. I would also like to recognize the outstanding legacy of the Gutsche family and personally thank the whole family for their support and guidance during this time, and a big thank you to the CCBA team for working so collaboratively and diligently ahead of today's announcement. So let me take a moment to walk you through the agenda of today's call. As you can see, we will mostly focus on the acquisition of CCBA. I will share an overview of CCBA and the strategic rationale of the acquisition, and Anastasis will take you through the financial effects of the acquisition. But firstly, I will touch on our Q3 results, which have also -- which we have also released today. We have achieved solid top line growth in the third quarter, demonstrating how we continue to deliver quality growth in mixed market conditions. Revenues grew by 5% organically, bringing us to organic revenue growth of 8.1% in the first 9 months of 2025. We saw good volume growth of 1.1% despite a mixed consumer environment and less favorable weather in some markets. Sparkling volumes remained robust, up 0.7%, driven by trademark Coke and Adult Sparkling, and Energy continues to perform very well with volumes up 34.3%. Organic revenue per case increased 3.8%, driven by both price and mix. We continue to leverage our revenue growth management framework to meet demand for both affordability and premiumization across our markets. I'm pleased that our focused execution through the key summer period enabled us to continue to gain value share in NARTD, increasing 80 basis points year-to-date. We continue to invest in our strategic priorities and our bespoke capabilities to deliver on our growth ambitions. Throughout the summer, we executed the successful rollout of the Share a Coke campaign across our markets. We dedicated customer and consumer experiences. I'm excited that we have also just launched the campaign in Nigeria this month with an encouraging start. In Energy, we launched a new Monster drink with Lando Norris across 16 markets, which has received very positive initial reactions. And in Coffee, we saw strong growth in the out-of-home channel of 34%, driven by both Costa Coffee and Caffè Vergnano. Finally, although we expect the broader macroeconomic and geopolitical backdrop to remain uncertain, we have high confidence in our 24/7 portfolio, bespoke capabilities and our people. And today, we are reiterating our guidance for 2025. So let me move on to the acquisition. Let me start by providing a quick overview of the key terms, but Anastasis will give a bit more detail later on. We have agreed to buy 75% majority stake in CCBA from The Coca-Cola Company and Gutsche Family Investments for a combined $2.6 billion purchase price. We also have a path to full ownership with an option agreement for the remaining 25%. As a reflection of our commitment to South Africa and the African continent, we are intending to pursue a secondary listing of Coca-Cola HBC on the Johannesburg Stock Exchange after completion, which we are targeting for by the end of 2026. So as I said at the start, we believe this acquisition presents a highly compelling strategic rationale, which, at its core, is about growth. Africa represents a key growth opportunity for our business. We have a long and successful track record of investment and growth in both Nigeria and Egypt. Today's model will materially enhance our presence in Africa by bringing together 2 leading bottlers in the continent, and together, we will represent 2/3 of Africa's total Coca-Cola system volume. This combination further diversifies our footprint, increasing our exposure to attractive geographies. We are excited by the growth opportunities across CCBA's markets, which are very compelling demographics, including sizable and growing populations and economies with significant potential to increase per capita consumption. The acquisition enhances our vision of being the leading 24/7 beverage partner. CCBA is a leading player in NARTD across its markets with a winning portfolio of over 40 global and local brands, further strengthening our exceptional portfolio. The acquisition also plays to our strength of operating in dynamic emerging markets. It gives us a platform to share best practices, leverage our best-in-class bespoke capabilities and invest further in CCBA to drive growth. I am proud that the acquisition will further strengthen our long-term partnership with the Coca-Cola Company. This important milestone reflects strong mutual trust and shared vision with the Coca-Cola Company. Finally, the acquisition also enhances value for all stakeholders. For shareholders, it is expected to be low single-digit EPS accretive in the first full year following completion with a clear prospect of creating more shareholder value over the long term. Today's acquisition is fully consistent with the key pillars of our growth strategy. Many of you will be familiar with this, as we first set them out in 2019. Everything we have done to grow and strengthen the business since then has been built on these pillars. In brief, the acquisition of CCBA will enhance our unique 24/7 portfolio with a strong portfolio of global and local brands, allow us to further develop and deploy our bespoke capabilities to win in the marketplace, fuel growth and enhanced competitiveness as we continue to invest across the combined business, enable us to build the best teams in the industry and cultivate local talent. And importantly, we will continue building our license to operate as a leader in sustainability and drive a positive impact in the communities in which we operate. Let me take a few moments now to give you an overview of CCBA's business. CCBA is the 8th largest Coca-Cola bottling partner in the world by revenue, and accounts for about 40% of all Coca-Cola beverages sold in Africa by volume. CCBA has a strong track record of performance with net sales revenue in 2024 of more than EUR 3.4 billion and EBIT of EUR 246 million. Growth has been strong with a 3-year volume CAGR of 4.5% and currency-neutral revenue growth of over 12%. CCBA has a range of markets varying from the more developed, namely South Africa, which accounts for 60% of volume, to markets that are emerging, for example, Ethiopia. These markets have very attractive demographics, both in size of population and average age with low per capita consumption, offering significant upside potential. And the balance of South Africa with steadier growth and significant consumption levels means we will still maintain a diverse mix of markets. CCBA has a strong portfolio of over 40 global and local brands across categories. Its 2 largest categories are Sparkling Soft Drinks and Water, which account for 81% and 9% of total volumes, respectively. The combination will result in a broader, stronger total portfolio, enhancing our vision of being the leading 24/7 beverage partner. And like Coca-Cola HBC, CCBA holds market-leading positions in NARTD across its markets, including in its 5 biggest territories. So a formidable business across Africa in its own right. But what excites us so much is the huge potential to unlock growth by combining our 2 businesses. Adding CCBA's 14 markets to our existing operations in Nigeria and Egypt means that combined, we will be the largest Coca-Cola bottler in Africa, serving over 800 million consumers or over 50% of the continent's total population. In volume terms, that's 1.8 billion unit cases in Africa or 2/3 of Africa's total Coca-Cola system volumes, and we will cover 60% of Africa's GDP. This alone would give us huge opportunities for growth. But as we look further into the future, forecast suggests that Africa's population is expected to grow by 2% per annum through to 2050. And GDP per capita is set to grow 4% per annum as well. This gives us access to a large and growing consumer base and economies from which to recruit new consumers. It will underpin our future growth, and it's a proposition that we are very excited about. As a business, Coca-Cola HBC is already fortunate to have a diversified footprint across established, developing and emerging markets in Europe and Africa. The acquisition of CCBA strengthened their footprint by increasing our exposure to markets with extremely attractive demographics. Let's take a closer look at the consumer recruitment potential across CCBA's largest markets. In each of these key countries, not only is the population projected to grow steadily, but crucially, it's a predominantly young demographic. In fact, over 60% of the total population is under the age of 30, highlighting a significant opportunity to engage a new generation of consumers. Added to this, there is a huge potential to grow per capita consumption, 4 out of 5 of CCBA's largest markets currently see Sparkling per capita consumption below Nigeria and well below the current Coca-Cola HBC average. In Nigeria, where per capita consumption is at 72 servings, we have seen growth of nearly 20% in the last 5 years. In close partnership with The Coca-Cola Company, we look to continue CCBA's work of recruiting consumers and building brand equity across its NARTD portfolio. The combined business brings together 2 companies with strong operational and financial foundations. I won't read out all the figures on this slide. But on a pro forma 2024 basis, the combined business would have generated volumes of 4 billion unit cases, revenues of EUR 14.1 billion and EBIT of EUR 1.4 billion with a healthy margin. One of the reasons we are confident we are the right partners for CCBA is because we have proven our ability to successfully operate and consistently deliver in emerging markets, and Africa is no exception. Our experience in Nigeria and Egypt has created a deep understanding of how to play to win in the dynamic, fast-changing environment. Our business was born in Nigeria, and in the nearly 75 years since, it has gone from strength to strength. Nigeria now represents 15% of our total volume after delivering 10% compound volume growth and significant market share gains in the last 5 years. That's a result of the consistent investment that we made in the business over the years. We are also very pleased with the good progress we've made in Egypt. Having acquired the business in 2022, we have integrated it over the last 3 years, and I'm really pleased that we've seen strong market share gains, a testament to the joint investment with the Coca-Cola Company and our teams on the ground. We have substantially expanded our cooler network in the country and invested in production facilities. We've expanded the portfolio, introducing the Energy category in the market, which has seen phenomenal growth. Importantly, we have also invested in our bespoke capabilities, ramping up the revenue growth management framework, overhauling the route to market and launching new digital and data-driven tools. Our experience in Egypt has taught us a lot, and we will take these learnings when we start to integrate CCBA as well. And in Egypt, we are now in the position to move to the next phase of growth. With this experience in Nigeria and Egypt, we are uniquely placed to bring our commercial excellence, our best practices, our bespoke capabilities and our high-performance mindset to CCBA's markets. We are also very respectful of CCBA's long history in Africa and the knowledge of their markets. Therefore, we view this as a 2-way opportunity and are excited to share best practices and learn from the team at CCBA as well. We would also like to invest further in CCBA jointly with The Coca-Cola Company to support long-term growth. You heard us talk many times about our bespoke capabilities, revenue growth management, route to market, customer management, digital commerce, data insights and analytics and talent development. These are critical tools for us to drive sustainable, profitable growth across our markets, increase market share and drive joint value with customers. Our experience in Nigeria and more recently in Egypt has shown us that it's critical to make sure our bespoke capabilities are purpose built to win in Africa. Nigeria has been where many of our best bespoke capabilities come to life. It's often selected as the test country for pilot projects in areas such as route to market, RGM and data and AI initiatives before being rolled out more widely across the rest of our business. When it comes to RGM, we make sure that we balance affordable offers such as the returnable glass bottles with premium offerings as well. We make sure we are using the latest data-driven segmentation tools to address customer and consumer needs. With our route to market, we have an omnichannel approach to cover 100% of the market with a sizable skilled sales force, and we have developed locally relevant digital tools, such as our WhatsApp chatbot. All these help us drive high Net Promoter Scores in the market. And last, but certainly not least, our talent, our unique sales and supply chain academies and our high engagement scores reflect our long-term commitment to developing talent and strengthening capabilities. Driving growth in a responsible way is a core to our approach at Coca-Cola HBC. Much like CCBA, we also believe in creating value and sustainable growth for everyone who touches our business. For us, that starts with our people. We believe in cultivating local talent by accelerating capability development to fuel growth. We are committed to serving local communities through local production and distribution, and we work locally with suppliers. We can see CCBA has done a lot of work to be a good community partner, and we look forward to working with them on the outstanding progress already made. And I'm proud that Coca-Cola HBC is one of the founding members together with the Coca-Cola Company and CCBA of The Coca-Cola System's Africa Water Stewardship Initiative. The system effort aims to invest nearly $25 million by 2030 to support water solutions across 20 African countries. And finally, as I said earlier in the presentation, our commitment to Africa, including South Africa, will be underpinned by our decision to seek a secondary listing for Coca-Cola HBC on the Johannesburg Stock Exchange. Let me now hand over to Anastasis to talk you through the financials and structure of the acquisition.

Thank you, Zoran, and good morning, everyone. As Zoran mentioned, we have agreed to buy a 75% majority stake in CCBA for a $2.6 billion purchase price. That equates to a $3.4 billion implied equity value for 100%. The acquisition is in 2 parts. The purchase of 41.5% from the Coca-Cola Company for $1.3 billion, and the purchase of 33.5% from GFI for $1.3 billion, comprising USD 308 million in cash and issuance of shares equating to a 5.47% stake in Coca-Cola HBC. In addition, we have a path to full ownership through an option agreement with The Coca-Cola Company for the remaining 25% of CCBA. We intend to finance the cash consideration of the acquisition through entering into a EUR 1.4 billion bridge facility. Zoran has set out a strategic rationale and why we think this is such a compelling acquisition to drive long-term growth. I'm also pleased that we expect the acquisition to be low single-digit earnings per share accretive from the first full year following completion, which is expected to be 2027. We expect leverage post completion to be towards the top end of our medium-term target range of 1.2x to 2x net debt to EBITDA. Importantly, we are not expecting any impact to our credit rating, and we have a strong commitment to sustainably maintaining an investment-grade profile. As a reminder, we currently have invested great ratings with both S&P at BBB+ and Moody's with Baa1 ratings. As always, we will focus on deleveraging and the repayment of our debt obligations. As a combined business, we will continue to focus on free cash flow generation as evidenced through our strong track record in recent years, and our balance sheet remains strong with well-balanced debt maturities that we can repay throughout our cash flow. The acquisition is fully consistent with our capital allocation priorities, which remain unchanged. Our #1 priority remains investing in the business, and we maintain a progressive dividend policy. And as we demonstrated today, we will pursue strategic acquisitions when they are value enhancing to shareholders. And so with these priorities in mind, and as a consequence of today's announcement, the existing share buyback program, of which we have completed around 60%, will be canceled with immediate effect. In summary, we believe this is a great deal for all the shareholders, and we look forward to driving continued value creation alongside our partners at the Coca-Cola Company. As Zoran mentioned earlier, this deal has growth longevity for Coca-Cola HBC, is earnings accretive and is consistent with our capital allocation priorities. Finally, let me share a picture of the shareholder base for both Coca-Cola HBC and CCBA post completion. As already mentioned, GFI will own 5.47% in Coca-Cola HBC, and Kar-Tess Holding and The Coca-Cola Company will continue to own large holdings in Coca-Cola HBC. Meanwhile, CCBA will be owned 75% by Coca-Cola HBC with 25% held by the Coca-Cola Company with a path to full Coca-Cola HBC ownership post completion. Full details on this are in our press release. Thank you very much. Now, let me hand back to Zoran to summarize.

Thank you, Anastasis, and thank you all for joining us today to hear about what we believe is a fantastic development for Coca-Cola HBC. CCBA is a great business with strong brands and leading market presence across Africa. This acquisition will materially enhance our presence in Africa and its exciting growth market and allow us to leverage our experience in emerging markets and our bespoke capabilities. We are very excited about the combination, and we have great confidence in the opportunity ahead of us to drive sustainable profitable growth. With that, let me hand back to the operator to start the Q&A.

[Operator Instructions] Your first question comes from the line of Laurence Whyatt of Barclays.

A couple for me. I'll start with the first one. When you've given us your estimate of low single-digit EPS accretion in the first year of ownership, what have you assumed there in terms of cost synergies that you expect to gain from this transaction? And do you think there are going to be any costs associated with getting those synergies? That's my first question.

Laurence, this is Anastasis. So let me take this first one. And let me also reiterate how excited we are about this strategic opportunity for further growth expansion, which is actually, as we have outlined, the main driver of the acquisition, which is top line growth. Obviously, in CCH, we have a history and a culture of driving efficiencies and looking through our processes, especially in supply chain, production and logistics, and we look to identify opportunities to optimize costs. So there is a certain element of that captured in our expectations. But let me reiterate that it's a top line growth rather than cost synergies that are the key driver of this acquisition.

Okay. And then secondly, with regard to the put and call option, I was wondering if you could just run us through how that's going to work. Are there any hurdles that need to be hit? Is there an established sort of valuation principle around those options? Any just further color you can give us on the put and call options would be very helpful.

Yes. Look, there is actually no restrictions or no kind of clear like targets or requirements for them to be met. It's mostly in our decision that with this phased approach, it allows us to have a more effective liquidity management, and it will also allow us to have more time as we gain more opportunity to learn about CCBA in the market and work, of course, closely with the Coca-Cola Company in order to have a smooth handover to the full ownership and transition in the business.

Could you tell us is there any sort of established valuation principles around those options? Or is that going to be done at the time that they're exercised?

No, no, there is no such a valuation principle.

Question comes from the line of Sanjeet Aujla of UBS.

Zoran and Anastasis, congratulations on this. A couple of questions from me, please. Firstly, a lot of emphasis around growth surrounding this deal. I appreciate CCBA has been growing. I think the volume is mid-single-digit, organic sales around low double digit. But is the opportunity to accelerate that and invest upfront to accelerate that pace of growth or to sustain that sort of growth? I'm just trying to understand a little bit better, what do you think is a more sustainable growth trajectory for the asset you're requiring? That's my first question.

Sanjeet, thank you. Look, this is about growth and driving growth. So I think you have seen that our approach is when we believe in something very strong like we do in this, then we do all the necessary things, and that can include also front-loading our investment to drive that growth and to build all the necessary fundamentals where we see that such need to be either built or further strengthened. And by that, I mean, immediately the assessment of our critical growth capabilities and to see how we can further support. And those kind of things usually mean that we invest in advance, whether that's in the teams, their expertise, knowledge, systems, tools. And we are very convinced that, that is always money very well spent. So that's an important part behind the way how we see igniting long-term growth there.

Got it. And my follow-up question, just looking at the -- some of the financials you provided, I see CCBA's EBIT margin is around 7.5% in 2024. I think a number of years ago, the business was delivering margins maybe closer to CCH levels. So I appreciate your comments about investing upfront, but I guess, over a medium term, let's say, 3, 5 years' time horizon, is it conceivable for those margins to perhaps get back up close to where CCH is operating? Or do you think with a longer duration investment horizon?

Yes, absolutely. We do see the opportunity to drive margin expansion in the medium to long term. But as Zoran was highlighting, this will come mainly from the top line growth of those markets. But clearly, we will also see any operational efficiencies, especially when it comes with our investments, as Zoran was highlighting in production efficiency and digital. Now, let's not forget, as you said, that CCBA is already a profitable business. The line was not very good. So if the question was also coming from a little bit of the margin development over the last years, if I got it right, let's not forget that through this time, the last time they came in public with expectations, we were in the COVID period, then there were significant global inflationary pressure in commodities, and then, they faced certain currency volatility, right? So -- but from the exercise we have done and the view that we have is that we believe that we can continue to see a recovery of the margins going forward.

Question comes from the line of Nadine Sarwat of Bernstein.

One for me. It's great to hear all of the enthusiasm regarding this deal. And clearly, there are a lot of opportunities that you've highlighted, both top line, but also profitability. Maybe we could touch on maybe some of the challenges that you might anticipate facing prior to the deal completing, but also post the deal completing. What are you anticipating some of those challenges might be? And how do you plan on tackling those particular challenges? What's your approach?

Thank you, Nadine. Look, first of all, it is a strong confidence. And as you said rightly, it's excitement that we feel because this is truly something transformational for our growth and future. But of course, emerging markets do bring a certain level of risks. However, we believe and see from our experience that we have already from Africa, both in Nigeria and Egypt, is that this is much more outweighed with the opportunities that these markets bring. In my introductory remarks, I shared things about demographic, size, per capita, overall economic development opportunity that exists across these markets. So those opportunities give us huge confidence that with the experience that we have, with the knowledge and experience how we operate and play and our play to win attitude in these markets, we really think that we can navigate through all types of situations. And based on Nigeria and Egypt, just to mention those 2, in Africa, we've seen all kinds of situations. And with strong people on the ground, that's the biggest guarantee, how to act with agility and speed and do the right things for the business. And we are always mindful of not only of the short term, but always building fundamentally strong business for the long term. And we do have the very robust planning, scenario planning, contingency practices that we are all the time exercising for all of our markets, but even more to the emerging. So with all this, I just want to say that, yes, clearly, there can be risks, but we are much more guided by the opportunities that this presents to us.

Your next question comes from the line of Andrea Pistacchi of Bank of America.

Yes. Congratulations. My first question is on South Africa, which is the largest market of the business. Per capita in Sparkling is, I think, quite high already in South Africa. So where do you see the main growth opportunities there? I mean, in the other markets, Ethiopia, et cetera, it's very clear, low per caps, excellent demographics, et cetera. But what do you see as a growth driver in South Africa, please? And the second question, when you -- as you combine the 2 businesses, are you able to give any perspective on how your -- the growth algorithm of the company changes, if at all, 6% to 8% top line whether you think you'll be able to grow slightly faster and maybe a slightly different mix between volume and price mix.

Andrea, so on South Africa, yes, indeed, very exciting and critical market for CCBA. We have seen that there is a strong business there. But we believe that there are a number of opportunities. One is the overall increasing the pie, if you will. And then for sure, there could be opportunity in further portfolio fine-tuning and development that we would explore. On top of that comes the revenue growth management, which we are extremely passionate about when we know how much it means in converting the potentiality of the portfolio into profitable revenue growth. So what we will do, and we see opportunity in assessing the overall OBPC, where we clearly want to understand what are the key occasions, which brands are tapping there, with which packs, at which price and at those channels. So we would be doing that to also understand how further we can support and develop all the affordability options with possibly relevant entry packs, which clearly play a role in every market, and South Africa is no exception. And then also, we do see opportunities with premiumization offerings. So we are very excited with South Africa. First of all, it's a great business already. And we are just excited how to support and invest behind this business to take it further, and we are confident that we can do that. On the next one, I can just say that, look, Andrea, we are just at the point of announcing, and we will be coming back in due course where we will be sharing more of how we think about the combined entity or combined business, and we will be very happy to share those.

Can I just add a quick thing? I may have missed it, but did you give us a coupon at which you're financing the deal, the bridge loan? Or could you, please?

Yes. I mean, look, the financing of the deal, as you have seen, is on -- structured on issuing of bonds. Well, you would expect that the cost of finance should be in -- within the prevailing market rates, the CCH prevailing market rates, so yes.

Next question comes from the line of Aron Adamski of Goldman Sachs.

Zoran, Anastasis, Jemima, congratulations on the deal. My first question is on coolers. I suppose that having a wide cooler footprint is critical to succeeding CCBA geographies. And when you look at CCBA's footprint and penetration of the cold drink equipment, do you think it's a well-invested business on that front? Or after the completion, should we expect the CapEx to step up?

Aron, thank you. So this whole case has been built on how to drive growth where commercial strategy and commercial pillars play a significant role. Next to the revenue growth management I talked earlier, this is then backed up and executed with a very robust comprehensive route to market. And within that is also a cooler strategy. We've seen so far a solid cooler positioning across the markets. However, we do see more opportunities, and cooler, overall, strategy for us is Hellenic is one of those that really matters for all our categories. So that is part of our overall plan for sure.

Aron, to come to your CapEx question -- yes, to come to your CapEx question, Aron, as you understand, as you rightly pointed out, that we would expect that we would invest ahead of the curve in CapEx and OpEx at the first 2 years in order to support the growth that has been as Zoran was highlighting. And that CapEx investment definitely includes cooler placements in line with the route to market opportunities. As I said earlier, production capacity to ensure the growth and modernization of our facilities and digital tools and technology to support the overall growth. But I want to reiterate also that we have a good -- we have a very good record on having a playbook actually that delivers successfully implementing investments in the markets over the years while delivering profitable growth, free cash flow generation and a very strong balance sheet while gaining share. So -- and that's what we plan to do here as well.

Very clear. And then my second question is on transactional FX. It has definitely been a key topic in your African markets over the past few years. So I was wondering if you can give us a sense of what percentage of CCBA's cost of goods sold are denominated in hard currencies. Does CCBA currently hedge that exposure? Or is that an opportunity for you? And just going forward, is there an opportunity -- do you see any opportunities to reduce the exposure to hard currencies in Africa as a whole going forward?

Look, we're not going to go through that details for the call. I'm sure that you can connect with Jemima and the team to get any support you need. But obviously, I want to reiterate, as Zoran said, we have a big experience in operating in Africa. I have to say that Nigeria and Egypt has given us quite a big level of developments with currency volatilities and inflationary pressure. And I think we have demonstrated that we have navigated very effectively in these markets, and our learnings and our experience will be put in place as well in the new markets.

Next question comes from the line of Simon Hales of Citi.

Congratulations for finally getting this deal done, guys. I've got 2 questions, please. I mean, firstly, Anastasis, can you just talk a little bit about the cost of capital you're assuming on this transaction and how we should think about perhaps the payback period or the time frame for that to covering your cost of capital? That's the first question.

Yes. Simon, first of all, again, I have to repeat that the rationale of this acquisition is on long-term growth opportunity that we get from CCBA. And you have seen that over the year, we have very good progress on ROIC as a group, even we reached 18.3% last year. However, we have always said in many calls that for the right strategic acquisition, and the case of CCBA is exactly that. We are prepared to see our ROIC progress slow down in the short term. At group level, we expect to continue to generate ROIC above our cost of capital post-acquisition of CCBA. And of course, I will be working through the plans now with The Coca-Cola Company to deploy more in the market. We will come back, and we will clarify more about the specifics on the CCBA ROIC development. So -- but let me reiterate that again, this is about the long-term opportunity that Africa has, and we're very excited about it.

Got it. And then secondly, just on the profitability of CCBA. Obviously, you've disclosed the EBIT and EBITDA numbers going back over the last sort of 3 years. Some of those numbers look quite volatile, and I think EBITDA over a 3-year period has been broadly flat. Is there anything particular we should take into account when looking at that recent historical trajectory? And then second to that, when we think about the translational FX impact that we've seen across CCBA over the last sort of few years, how much of a headwind on average has translational FX been to you?

I think that the second part of the question, I'll repeat what I said earlier that from what you've seen over the last years, there was a certain negative impact from FX volatility that resulted to other remeasurements or pressure on both transactional and translation to those markets. And that has been the main driver, considering also, as I said before, the significant inflationary pressure on key commodities following the developments of what we've seen globally, right, over the years. But what we can say now is to the extent that we can disclose that since we are not in control yet of the business is that they're on a good recovery trajectory. And as I said before, in our assessment, in combination with the top line growth and the RGM exercises we are seeing, we believe that they will get back on a good track to recover margins in those markets.

Next question comes from the line of Fintan Ryan of Goodbody.

Two questions from me, please. Firstly, on a slightly different note, within your sort of -- within the core CCH business, organic sales growth slowed to 5% in the quarter. I appreciate that a quarter is a short time frame, there's a few dynamics in specific markets. But could you give us a sense of what the run rate trajectory of that was towards the end of the quarter? And on a stand-alone basis, could you -- would you still be hopeful to see an acceleration towards the 6% to 7% current midterm guidance for FY '26 on top line? That's the first question.

Fintan, yes, on the third quarter, as I said in the intro, we are pleased with that quarter, especially as after first 9 months brings us to 8.1% of the organic revenue growth. And especially important is that we are consistently delivering that with a positive volume. Yes, with, of course, price mix and continuously gaining share. As we highlighted, Q3 has been characterized with not so good weather in a number of markets, and that left some impact. And also, we've seen a mixed bag of some more resilient markets, some of them coming back actually to the positive performance, like, for example, Poland and Switzerland. And then you see some of the more stable backdrops for Nigeria and Egypt, where we are continuously performing well, very pleased with that. Also, we see good Ireland, stable Hungary. And then, look, there are some couple of challenging markets, Romania, which feels the effect that last several years, we've had taxation and regulatory changes continuously. And somehow that cumulatively does have an impact on the consumer. We've seen also, unfortunately, some of the in-market turmoil in Serbia, which also has an effect on the consumer. So this is just to give you a little bit of the flavor as we've been this time more short on the Q3, but to reiterate the confidence that we will be having the higher growth rate in Q4 than Q3. To remind you that Q4 is the quarter with the most favorable cycling rate, we do see also technically even one more selling day. We see also that Share a Coke in Nigeria, which is an important campaign in an important big country in -- when it's the season there. And also last, but not least, is also the revival and now fully operational Bambi biscuits business, which is coming back on stream. So we feel confident to be where we guided for. And then I would just shortly, Fintan, reiterate that we do see our midterm guidance of 6% to 7% as being valid and what we will be really shooting for, and we believe that we can and we will do that.

Great. Very clear. And just a follow-up. Could you give us a sense of what -- within the CCBA business, could you give a sense of what the current capacity utilization is, the assets -- production assets and I guess how that benchmarks versus Nigeria and Egypt? I think on the slide, you also mentioned that you've got 100% channel coverage within the Nigerian market, obviously, that's your best in class, where does that metric sit for some of the key CCBA markets?

So look, we wouldn't go into any specifics or details now on CCBA. We will come in due course where we will look -- present how we think about the combined business. But we know that at the moment, business, I can just say that there are no constraints for the business there. And for the performance that is delivering, we have seen that there are a couple of capacity expansions happening this year. So we have seen that the business there is actually well -- having initiatives, which are supporting well the capacity expansion to be able to deliver the growth rates that, that business has -- that business is shooting for. So we don't see any issue there.

Your next question comes from the line of Charlie Higgs of Rothschild.

Zoran, Anastasis, congratulations. I just had a question on management intention with this deal because if I think back over the past few years, what CCH had to dealt with, it's probably the most of any bottler I've seen with currency devaluation, conflict, commodity inflation, the fire at Bambi. So how do you think about successfully integrating CCBA in the context of what historically was quite a volatile world? And then I have a follow-up, please.

Charlie, thanks for this question. That gives me the opportunity to say that when we make a decision like this, obviously, it has to be based also on our own true assessment of the in-house capability, talent and people we have. And that's one of the driving forces why I believe that the time was great and right for us to step into this new opportunity. I'm very proud of the bench strength that we have. And for everything that you said, what we've been dealing through, is a great testament to the skills and expertise and knowledge of our teams that have been dealing with both locally on the ground, which I emphasize as a #1 priority, but also on a regional and group level, which provide critical support for our teams on the ground. So we feel we are well equipped with this. But also, I would add that we see lots of talented, capable people in CCBA, and we see that it's just a matter of a good blend. And our intention is to support local talent, and we will do every effort and investment to support people across countries in CCBA. And we are all excited to learn the teams and people there to greater extent and incorporate them in all our talent management and development programs. And I'm sure they will bring a breadth of experience and knowledge from their markets, and we will primarily leverage and capitalize on that.

And then my follow-up is just on kind of the way that you report at the moment, you have Egypt and Nigeria in your emerging segment, should we expect that going forward you perhaps dedicate a segment purely towards Africa to help try and bring in more focus and accelerate the growth there?

Charlie, yes, as you can understand, we are still working on the best approach on how this will be the most appropriate way to see our segmental reporting and, of course, being compliant with our financial reporting requirements. So bear with us a little bit, and we will communicate in due course once we're closer to completion on the best way to see this new structure.

Next question comes from the line of David Roux of Morgan Stanley.

Congratulations on the deal. And as a South African, I certainly look forward to a site visit there at some stage to see the assets. My question is just on the production footprints of the CCBA portfolio. How much of production is local for local? Or is there a large component that is produced in South Africa for exports to other African countries?

David, actually, CCBA network is quite well widespread across countries. And big majority of everything that's sold across the countries is sourced and produced within respective countries.

Your next question comes from the line of Mitch Collett of Deutsche Bank.

Zoran, Anastasis, congratulations on the transaction. And I know you've been asked this a few times, but maybe I'll try and ask it a slightly different way. What would be the appropriate organic growth algorithm to expect for the acquired business? And would it be safe to assume that it's above your current 6% to 7% medium-term ambition? Given what you said about the scope to improve profitability, does it do anything to your 20 to 40 basis points of annual margin expansion? I mean, are there any structural reasons why those markets -- why the acquired markets would be less profitable? And then thirdly, you've said it takes you towards the top end of your target gearing range, given your growth algorithm and the cash generation, what is the cadence of de-gearing you expect to see going forward?

Mitch, thank you. So look, while we said that we will come back in due course where we will be more specific how we see the growth algorithm, but obviously, we are talking here about more growth opportunities and to drive more growth. So to which extent and how that will be translated in the algorithm, we will come back on that. But for sure, it just solidifies and strengthens the guidance that we have, and then, we will see what potentially this can imply more going forward. However, I would rather emphasize the opportunity and to say that with that per capita situation that we see currently, that's a fertile ground to recruit more consumers with a relevant portfolio with really working through sound revenue growth management, which really takes into account affordability needs because realistically, we know that all these countries and markets really need affordability propositions. And it's up to us together with CCBA team to further develop and offer those things that will really ignite more recruitment, driving more transactions. Particularly, we see that there is a quite relevant segment across countries, where more premium propositions also play a role. I'm very confident that also with our data insights analytics, we will be able to work through the data to uncover more opportunities based on which we will design the plans. So I'm just saying all these things, Mitch, just to reiterate more, how, in substance, we are looking about the construct of that growth, for which specifics, we will come back later because we believe that at this stage will be just too early. But let me close with strong optimism and confidence that I believe that this offers for more growth. Anastasis?

Yes. Mitch, let me start a little bit now on the debt structure and the leverage impact. But as we have clearly highlighted that this is an acquisition that is structured in a way that the funding is designed in a way to mitigate any potential deterioration to our credit metrics and ratings. And we do expect that our current credit worthiness to remain as is. As you have seen that the funding is quite balanced with both the use of debt and using also of shares with a very clear focus to maintain the acceptable leverage performance that we have. And I will share a bit more in the second. And of course, the work with the rating agencies that has taken place has actually performed several stress tests of all scenarios you can imagine to make sure that we maintain a very good credit level. Now, with that, the acquisition is expected to bring our net debt to EBITDA ratio close to our top end range of the 1.5 to 2x, as I said earlier. And if you are considering the deleveraging, we would expect that to start from 2027 onwards, as we progress following the acquisition.

Just to add one more thing, Mitch. For us, it goes without saying in the algorithm of driving growth, it's also very important the marketing and then consequential market execution that we do with Coca-Cola Company. And we've seen some very strong relevant passion point activations that in these type of markets really work very well, and that gives us also a good confidence that we will have a great platform that we will then activate with our customers and across the trade. So I just didn't want to miss the opportunity to emphasize that. Thank you, Mitch.

Yes, very helpful. And just on the margin piece, maybe not a lot you can say, but does it change your 20 to 40 basis point margin aspiration? Is there any reason, any structural reason why CCBA's markets would be less profitable than your existing CCH markets?

Look, I think as you can understand, Mitch, when you compare it to what we've seen in '24 to today, you would expect that the average margins are lower to the overall CCH rate. But what I can reiterate is that we expect that we will continue to be able as a group to drive margin expansion to what we have provided as guidance already. So that will not slow down our opportunity to grow margins.

Next question comes from the line of Philip Spain of JPMorgan.

I just had a follow-up around the organic growth a little bit because in -- you've clearly shown in Nigeria, your ability to leverage very strong data and analytics capabilities to drive your volume growth as well as your strong RGM management. And you've obviously referenced that as being something you look to bring into CCBA to drive that top line opportunity. But just wanted to get a sense of how long you think it would take to roll those systems into CCBA, if it's something you do quickly across all the markets or if it's something you have to do market by market over time, just to get a sense of when we can expect that benefit to start to accrue?

Thank you, Philip. Look, I first of all want to acknowledge that CCBA already has fairly solid systems and the tools that they are using, and so it will be for us to assess, okay, where and how we build from that base. So for sure, from the experience of Egypt, we've seen that implementing our revenue growth management framework, additionally upskilling, training people to really work with it gave us the excellent impact and effect. And from whenever we will be allowed to do so, we really plan to help and support local teams with the knowledge and experience from our centers of expertise that we have across the group. That's exactly the template that we have done also in Nigeria that you referred to, as I mentioned, same was in Egypt. And so we will apply the same winning proven playbook, which always leverages the talent capability in the local countries, just additionally supported from the center as a capability building.

That concludes our question-and-answer session. I'd now like to hand the call back to Zoran for final remarks.

Thank you, operator, and I'd like to thank everyone for taking part in today's call at a short notice. Let me just briefly conclude. We are very excited about the combination, and we have a great confidence in the opportunity ahead of us to drive sustainable, profitable growth. Thank you very much, and wish you all a great day. Goodbye.

Thank you for attending today's call, you may now disconnect. Goodbye.