Kofola CeskoSlovensko a.s. (KOFOL) Earnings Call Transcript & Summary

Ladies and gentleman, welcome to Kofola's 2021 First Quarter Results Conference Call. You will now hear a recording of a summary of the group's results presented by group CFO, Martin Pisklak. This will be followed by business insights from CzechoSlovakia and the Adriatic presented by country's CEO Daniel Burys and Marian Sefcovic.

Dear Investors, Martin Pisklak speaking. First quarter is over. Compared to prior year, our group revenues decreased by more than 10%, and EBITDA dropped down by CZK 28 million. Of course, the main reason is COVID pandemic. The biggest drop in revenue experienced Fresh & Herbs business segments, especially UGO fresh bars and south restaurants. On the other hand, very good effect is that in April and May, our revenues grew up by 11% and 23%, respectively. This is positive message before upcoming main season. But back to the first quarter. First quarter is typically the most off-season period of the year. That's why COVID pandemic took us CZK 39 million only compared to CZK 138 million of loss in the fourth quarter of 2020. The main reason is, of course, cash -- cost management. In CzechoSlovakia, EBITDA margin decreased by 2.4 percentage points. However, the cumulated EBITDA margin for last 12 months still -- is still remaining over 20%. Also, Adriatic region did a very good job, and its profitability maintained over 12% in the last 12 months. Savings were realized also in the area of capital expenditures. In 2021, in the first quarter, we spent CZK 60 million compared to CZK 129 million in the same period of 2020. That's why we were even able to improve our free cash flow from minus CZK 142 million to minus CZK 128 million. Net debt-to-EBITDA increased to 4.1x. Such a leverage was expected, and we received a waiver from our financing banks in the end of March 2021. We are still keeping our 2021 EBITDA target between of CZK 1.03 billion to CZK 1.16 billion. Now I will hand my word to Daniel Burys and Marian Sefcovic, who will give you some more detailed management insights on our main businesses in CzechoSlovakia and Adriatic region. Thank you very much for your attention.

Hello, everybody. Here is Daniel speaking, again. I'm responsible for Czech and Slovak Kofola soft drink business. Let me briefly comment Q1 development. Our sales were minus 23% compared to last year, if we look on Ondrášovka and Korunní acquisition like-to-like. HoReCa was fully closed, On the go minus 27%, hard lockdown in both countries. Finally, retail, minus 5%. There are 2 reasons. First, excellent last year in January, February and front-loading in first COVID wave in March. Negative sales development was efficiently compensated by cost savings. EBITDA, CZK 95 million is a good evidence of business model verification. Nothing more to say. Q2 forecast is more optimistic. HoReCa sales reopening since May, including indoor in June. On the go is above last year, although the weather was cold and rainy. Positive is also the fact that more than 90% outlets are or will be open soon. Many outlets are in ownership transformation or consolidation. We see it as an opportunity. We are ready for high season with successful last year's strategy: maximum focus on [ growth of Kofola, ] seasonal outlets and local tourism support. People will enjoy freedom mostly in CzechoSlovakia. Thank you for your patience, and I'm sure we will report increasing figures next time. Bye.

Hello. This is Marian Sefcovic speaking from Radenska Adriatic. The first quarter of this year [indiscernible] despite difficult situation and success for Radenska Adriatic and shows promising strength for the following months. In Slovenia and Croatia, the HoReCa channel was closed for almost the whole first quarter of this year. Terraces and bars slowly opened, but still including certain restrictions. May, however, despite the very cold weather, very good sales results. First quarter of this year in Slovenia, due to the closed HoReCa sector also last year by 13%, but better sales performance in April and May achieved a rise by 18%. So the full period from January to May sets us at approximately the same level as last year. We are on our target, strong and ready for the summer season. In Croatia, we have closed the first 3 months of this year, only slightly below 2020 revenues, but due to the opening of the HoReCa sector and good results in retail, April and May achieved 45% growth in revenue. This contributed to overall growth compared to last year, and we are very close to the target. To sum up the numbers for first quarter of 2021, EBITDA for Slovenia is similar to last year. EBITDA in Croatia improved compared to last year, mainly due to sales performance. As such, the EBITDA result in the Adriatic region is slightly above last year. Sales performance of the first quarter in the Adriatic region is approximately minus 8% versus last year, but the performance in April and May is 25% above the last year. The prices of performs were favorable in the first quarter of 2021 compared to first quarter of 2020. We are getting ready for the main season. Despite a difficult situation, we are very active and introduced also some innovations and novelties to the Adriatic market. We had the launch of Gatorade energy drink from PepsiCo portfolio. We have launched [indiscernible] in 400 grams packaging and also 1 new flavor for this instant vitamin drink. During the lockdown, we didn't sleep, we were preparing innovative digital platform [indiscernible] in HoReCa outlets in Slovenia and Croatia. At the moment, it offers digital menus for guests and some visuals for outlets, but we are already preparing more futures. And last, but not least, we have started the business cooperation in Slovenia with the most renowned Slovenian soft drinks producer [indiscernible] that average our HoReCa portfolio with high-quality fruit juices. We believe that we are strongly prepared for the upcoming season and that also with these projects evolve, we will achieve our goals for this year.

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

I hope you can hear me.

Yes, we can.