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

Ladies and gentlemen, welcome to Kofola's Second Quarter '23 Results Conference Call. You will now hear a recorded presentation of Group CFO, Martin Pisklak; and business insights from CzechoSlovakia and the Adriatic presented by country CEO, Daniel Burys and Marian Sefcovic.

Dear investors, Martin Pisklak speaking. Please let me comment on second quarter results. I'm very glad that we bounced back from the bottom. Since 2019, our EBITDA margin decreased from 17.5 percentage points in 2019 to 14.1 percentage points in 2022. In June 2023, our accumulated EBITDA for the last 12 months reached 15.5 percentage points. We are still far away from 2019. However, I see this result as very promising for the future. We are still facing volume decrease. Volumes sold decreased by 12% in second quarter of 2023, which means decreased by 10% in the first 6 months of 2023. Our financial stability is very solid after the second quarter. Net debt to EBITDA ratio decreased to 2.5x, and cash balance increased by CZK 220 million compared to the June of 2022. The business segments are meeting or exceeding our expectations. Especially, UGO is reporting a very solid number after COVID restructuring. Based on overall promising results, we decided to adjust our goals for 2022. Now we expect EBITDA in the range of CZK 1.2 billion to CZK 1.25 billion. Management suggested to general meeting a dividend per share of CZK 13.5 per share. Thank you for your attention. Now I'm handing my words to Daniel and Marian.

Dear investors, my name is Daniel. And in Kofola Group, I am responsible for Czech and Slovak beverage business. Let me briefly comment Q2 performance. Frankly speaking, no surprise on the market. Drop of volumes due to price increase and long-term negative customer sentiment. Sales on budgeted level, which represents plus 6% compared to last year, a little bit better in Slovakia and in Czech Republic, decreasing sales of flavored water category. Visible savings on cost side, especially energy. Raw material impact we could expect later after top season because of critical raw material hedging. Top season was delayed due to spring cold weather. Market shares are stable. And as usually, we had to solve complicated relations with some aggressive discounters. We realized very successful Kofola summer marketing campaign [indiscernible] and Targa Florio tonic, that's the best innovation of the year. Top season sales in July and August were slightly below expectation. Reasons, weather and the fact that Czech and Slovaks enjoyed more holiday abroad, and they used the opportunity of cheaper food and beverage purchases in Poland. Very positive fact is drop of all our performance. We are on last year volume level, which is very success -- big success in context of negative beer HoReCa market sentiment. We expect positive top season EBITDA and gradual volume stabilization. Thank you, and drink Kofola, Daniel.

Hello, everyone. This is Marian Sefcovic, CEO of Radenska Adriatic speaking. Second quarter of 2023 has not been successful in Adriatic as we would have hoped. First and foremost, the weather was not entirely on our side with a very rainy weather in April and May. Also, we are noticing a decline in private consumption in retail as well as in HoReCa as a consequence of the economic crises and ongoing high inflation. Germany had started a technical session, and it looks like the tourist consumption in Croatia is not on the pre-COVID level yet. From a business point of view, Slovenia revenues in the first half of the year 2023 are high in comparison to last year by 12% and in Croatia by 6%. In both market and the beginning of 2023, we have implemented new price list to offset higher input costs. Sales volume in liters has declined in both markets, which was expected. But second quarter weather contribute extra to this decline. Nevertheless, Adriatic finished year-to-date with EBITDA plus EUR 0.6 million or plus 15% versus first half of the year 2022, which means we have successfully managed our cost growth. Second quarter EBITDA result is particularly in the same level as last year for the above mentioned reasons. Adriatic experienced a successful launch of a new segment of Radenska Function drinks [indiscernible] in a can format. New flavors of ORA was able to achieve an increase in liters versus 2022. In Slovenia, we are continuing for a third year with Radenska [indiscernible] campaign with [indiscernible] as a main price. In Croatia, we have a good goods campaign for the new format of [indiscernible]. We are still optimistic about the rest of the year, but we estimate that there is a risk that Adriatic Croatia will not be on the target itself. The prices of energy and material to have stabilized, but we face challenges to keep high market shares in the content of rising prices. Thank you, Marian.

Ladies and gentlemen, now it's time for your questions. [Operator Instructions] We have a first question from Mr. Pavel Ryska.

Good morning. I'm not sure if I can be heard at the moment.

Yes, you can.

Okay. First of all, congratulations on the so far very good results this year. My question is very simple. What's your current outlook for the prices of main inputs into production for the rest of the year? And maybe also looking forward into the next year, where do you think that the prices of sugars or sweeteners and -- sorry, the prices of plastics are headed?

Thank you very much. Thank you very much also for your questions. Regarding the input prices for the rest of the year, well, basically, nothing is changing compared to the numbers we have reported in the past quarters. The negotiations for the sugar and the other materials for 2023 -- 2024 did not start yet. However, our feeling is the sugar campaign should be very good. So that the -- basically, the volumes on the fields are above the average and also quality should be very good. But so far, we do not have any direct like offers from our suppliers. What we can only see are the forward prices on the commodity stock exchange, where the indication is like showing for next year some EUR 700 per tonne. But I have to say that the price on stock exchange and the real price for the deliveries don't necessarily correlate together.

[Operator Instructions] There are no more questions. This concludes today's conference call. Thank you all for your participation. A recording of today's call will be available on our Web page. You may now disconnect. Thank you, and goodbye.