Kofola CeskoSlovensko a.s. (48K.F) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Kofola's Third Quarter of 2025 Results Conference Call. Martin Pisklak, the Group CFO, will present a summary of the results. This will be followed by recording with business insights from Czechoslovakia, Adriatic, and Beers & Ciders segment presented by country CEOs, Daniel Burys, Marian Sefcovic, and CFO, Martin Rosypal.

Dear investors, welcome on our conference call. Yesterday, we reported the numbers for the third quarter of 2025. Basically, we have one positive and one negative thing, which we would like to present to you today. Positive thing is that all the cost initiatives which we did basically during the summer works and due to huge cost savings, we were able to deliver basically flat EBITDA compared to prior year. For us, it was very important that we stop drops in EBITDA, which we reported in quarter 1 and quarter 2, and we were able to report EBITDA of the level of CZK 725 million. We were also very positive in the end of September beginning -- in the end of August, beginning of September, we were also like quite positive with the recent development of the revenues. However, rest of the September, October and now also the November sales are showing us the negative trend and consumption sentiment, especially in Czech Republic is still continuing. And that's why we have to review our full year expectation. Our general expectation at the end of the summer was that we will be able to deliver at least flat result compared to prior year. This means basically almost CZK 1.9 billion. Currently, we see the EBITDA result for the full year on the level of CZK 1.75 billion. The main reasons of such a decrease are basically 3. First one is, as I already told, negative sentiment especially in the Czech retail market. The second one is the ongoing downturn in our export sales of the beer, especially to Central and Eastern European customers. And the last fact was that starting from October, one of the major retail players in Adriatic decided to discontinue sales of all branded products and turn solely to the private label products. And this also like negatively influenced or affected our outlook for the rest of the year. EBITDA of CZK 1.75 billion represents a decrease compared to prior year, however, should not hurt the financial stability of the group. At the moment, we expect that the overall leverage at the year-end will represent approximately 3x EBITDA, and we should not have any major financial problems. At the moment, we are in the process of like confirming budgets for 2026. And I believe that in the half of February, we will be able to present to you a bit more optimistic forecast for next year. Now I handle my word to my colleagues. Thank you.

Dear investors, here is Daniel speaking. Let me comment key moments of top season in Czech and Slovak soft drink market. We missed our goals, and we have to recalculate our year targets. Key factors are known: double-digit drop of Slovak market due to sugar tax implementation, worst weather in last decade and additional surprise, unexpected negative consumer sentiment, [ lot ] of complaining. Successful launch of Targa Florio retail formats, 154% compared to last year, perfect Rauch replacement and still small but dynamically growing Prager's Kombucha. Cost of material and services are under control. We realized cost-saving program, including reduction of 4% FTE positions. Q4 sales development shows that market recovery in retail will be difficult. Positive trend we see in the HoReCa segment. I'm quite optimistic in next year prediction. Material and energy prices are stable, and we expect solving market recovery. Thank you for your attention and drink Kofola.

Hello, everyone. This is Marian Sefcovic, CEO of Adriatic, speaking. The Adriatic region reported 8% decline in revenues year-over-year during the third quarter of '25, primarily driven by broad-based demand weakness. This revenue headwind resulted from lower consumer spending leading to sales volume decreasing of 12% in Slovenia and 6% in Croatia as well as a significant contraction in export markets, which saw a notable 6% decrease in demand across ex-Hugo markets. During this quarter, in August, we recorded a significant decrease in demand and consumption, largely driven by rainy weather and absence of prolonged tourism in the Adriatic region. As a result, our key markets delivered double-digit revenue decrease year-over-year for that month. At the same time, we successfully launched Prager's Kombucha on the Slovenian market, and we received one of the most prestigious design awards in the world, Red Dot for the redesign of Oraketa. Before the school year, we delivered the children of our employees with school supplies. We held another successful prize draw for Radenska. We gave away a mobile home. In September, we shared the new internal Radenska Adriatic with employees, which will serve as the central tool for information, collaboration, access to the internal content in the future. Thank you.

Dear investors, this is Martin Rosypal speaking, Finance Director of the Beer segment. I'm pleased to provide you with a brief update on our performance for the third quarter of 2025. During the summer season, the overall consumption in the Czech beer market decreased. Our domestic revenues were slightly above last year. We continue to invest in our brands. Our new products in the fast-growing nonalcoholic flavored beer segment performed very well and contributed to our performance. On the export side, revenues continued to decline mainly in Central and Eastern Europe as we continue to prioritize margin improvement and scale back lower value private label businesses. Taking Czech and export beer markets together, these dynamics led to an overall 9% decrease in revenues in Q3. Zubr celebrated a major victory this year, the lager Zubr Gradus 12 won first place in the Czech Beer 2025 tasting competition in the main category of pale lagers. The success confirmed that the brand's modern energy is built on strong foundations of integrity and craftsmanship. Although the short-term results are not satisfying, we remain committed to our transformation strategy. Our focus is on building a stronger, more profitable brand-driven business that will deliver sustainable growth in the long run. Thank you for your continued support and attention. Wishing you a successful day ahead.

[Operator Instructions] We have a first question from Mr. Bartek.

I would have 3 questions. First, if you can elaborate a little bit more on what do you see in the Czech market, whether you see, for example, more promotions or price reductions by your competitors, KMV and others, or whether you see, for example, move to the private label more? Second question would be prices of sugar and sweeteners for 2026. If you can share the result of your purchases for the next year? And third, with 3x projected leverage for the year-end, what influence it would have on your dividend policy? You didn't mention or didn't repeat the dividend policy in the slides for Q3. So if you can talk about the dividend policy, how it looks?

Okay. Thank you for your question. Let's start with the easiest one, which is sugar. So basically, for 2026, we expect that the sugar price will increase by some 1% or 2%. So nothing major basically, it should be very stable compared to 2025. In terms of the Czech market, actually, what we see is that all the competitors are decreasing the prices. That's very natural, because also the material prices were decreasing during 2025 and the market simply works. So like everyone was able to decrease the prices, our competitors did, we did as well. Some price decrease will continue also in the beginning of 2026. That's more than sure at the moment. And I think there is not a major shift to private labels. What we see is rather that people are spending less on the food and beverage category in retail. That's something basically what we see in all the market researches which we have available. And it's also very visible on the market. So basically, you can see that, for example, during the summer, you were able to buy a bottle of the beer for less than CZK 10, which is the price which was not basically available on the market for a very long time. So the discounts are very deep in all the segments and the customers are not buying so much goods as we expected them to buy. What we see is that people are like spending more because all the macroeconomic indicators are showing that people, they basically have more dispensable income, that the macroeconomic situation is improving and so on and so on. But consumers were spending on the other hand for services in 2025. We see a huge increase of the travel agencies, for example, in 2025. On the other hand, the sector of the hotels on the Czech market during the summer were also reporting some 20% decrease in the revenues. So most probably people simply left for the holidays abroad, so they did not spend the money here in Czech Republic. And we also see that the other categories of services are improving very significantly in 2025. So we believe that now in the last quarter, we should find the bottom of this trend, and from 2026, we should start with some like moderate growth to improve the position again. And in terms of the leverage and dividends, at the moment, I would say that if the results will be comparable with prior year result, I would also expect comparable dividend with prior year dividend. Still what we see is that we believe that the dividend yield should be somewhere between, let's say, 4% and 5% of the share price. So let's see the situation in the second quarter when we will be deciding for the exact dividend. But at the moment, I would say that if the result will be comparable with prior year, also the dividend will be comparable with the prior year.

Maybe 1 more question regarding the Beer segment, what cost development you see there in the raw materials?

The cost development is very similar to the development in non-alcoholic beverages. So there are no major cost shocks or whatsoever. In the Beer segment, we did not realize so much cost cuts and initiative. We are still continuing in investing into the market. So basically, we changed the branding of Zubr and Holba. Next year, Litovel is coming, and we're investing heavily into the market as it was in our strategy. So we did not realize much cost cuts in this segment. We believe that this investment should return in some 1- or 3-year period definitely.

Next question is from Mr. Kubik.

I would like to hear if you correctly hear me?