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

Ladies and gentlemen, welcome to Kofola's 2023 Results Conference Call. You will now hear a recording presented by the group CEO, Janis Samaras, and a summary of the group's results presented by Group CFO, Martin Pisklak. This will be followed by the insights from Czechoslovakia and the Adriatic presented by country CEO, Daniel Burys and Marian Sefcovic.

Dear investors, I'm pleased to begin this year's commentary by saying that nothing unusual happened in 2023. This is something we have almost forgotten over the past 3 years. After years of COVID, the energy crisis and inflation, we have been able to focus fully on growing our business. At the beginning of the year, we expected a 10% to 12% decline in soft drinks consumption and we have adjusted our costs accordingly. For most of the year, it looked like we would not be far off the mark. The reasons for our volume decline are mainly 2: rising costs reflecting input prices and decline in household purchasing power. This has been particularly felt in our traditional beverage divisions. On the other hand, LEROS and UGO trade showed strong volume growth with very solid margins. I was also pleased to see the fulfillment of our vision. In 2023, we laid the cornerstone of our agriculture division. We want to understand our raw material base so we invested in an area that is unusual for us. Approximately 60 hectares of apple orchards and 25% share in 200 hectares of coffee plantations in Colombia are the first step into a new world. We need to get our feet wet first, but we believe this is the right way to go. The Czechoslovakia segment, I believe, has bounced back from the bottom. The sales grew by 10.1%. The margin we have achieved in 2023 is very promising, but we are still a long way from our pre-2020 performance. The Adriatic region grew its sales by 7.3%. Here, we did particularly well in Slovenia. LEROS completed its post acquisition 5 years period exactly as projected. All key channels were strong and sales for 2023 grew by around 8%. We opened our first store in Cerny Most at the end of the year. The rising star is undoubtedly UGO. Strong sales growth of almost 24%, accompanied by strong profitability and an increase in satisfied customers was and it is the picture of UGO in the last year. So overall, we grew on an EBITDA by CZK 143 million. we reached the upper end of our expected range CZK 1.25 billion. We are projecting an EBITDA range of CZK 1.55 billion to CZK 1.80 billion for 2024. This range considers not only the impact of the new acquisitions, but also the further growth of the current group. At the end of the year, we announced our entry into the beer segment with the acquisition of Pivovary CZ Group, which represents the Zubr, Holba and Litovel breweries. Overall, the 5th player on the Czech beer market with a long tradition, countless quality awards and strong distribution, especially in Central Moravia. Beer is the family server. It is the strong segment in FMCG. It has been here for 500 years, and I believe it will be here for another 500 years. We are approaching the acquisition with great humility and we'll, therefore, keep this segment as a separate unit from Kofola's nonalcoholic division. In 2024, our beer sales could account for around 15% of the entire Kofola Group. Finally, I want to thank everyone who has pulled with us in 2023, especially our in-base suppliers, customers, shareholders and finally, consumers. We could not have done it without you. Thank you very much.

Dear investors, 2023 is definitely over, and our numbers were confirmed by the group auditors. Final results do not differ from the preliminary reported. Our group EBITDA exceeded CZK 1.25 billion. We hope these results mean that we are returning our profitability on a strongly growing path, which we know from the past. Our projected EBITDA for 2024 can reach even the number of CZK 1.8 billion. Also, the leverage of the company remains in a very healthy area. My colleagues will now comment on the individual segments. Thank you very much for your attention.

Dear Kofola investors, here is Daniel speaking. I'm responsible for Czech and Slovak soft drink operations. Year 2023 was very successful. We delivered historically best results on a decreasing market. But it is a history. Now we have to focus on '24. Q1 was according to our expectations. Selling price was increased just for increased VAT effect in Czech and BRS fee in Slovakia. Cost structure is stabilized, and I have optimistic sentiment for 2024. But sorry, I am optimistic always. Q1 is for soft drink industry the lowest season. We increased sales for 10% compared to last year. We grew in all formats. On-premise dynamics has slowed at home and on the go. The reason is weaker winter season in the mountains and impact of painful VAT increase from 10% to 21% in Czech koruna. We confirmed we are close to finalize conditions with all retailers. That's very good news. We are in launch [ pros ] in new innovations, where we focus on growing on the go segment. Key innovation is Korunni functional. We prepared strong marketing support for our brands. We plan additional 15% marketing investment. Summarizing, general economy looks stabilized. Q1 was okay. We are ready for tough season, and we believe '24 will be the best year in our history. Thank you for your attention, Daniel.

Hello, everyone. This is Marian Sefcovic, CEO of Adriatic speaking. In general, 2023 was a good and successful year despite all the changes and inconveniences, such as a lot of rain floods, rising energy prices, change ranges in the product's price. Mainly, we ended the year with a good financial results. EBITDA for the Adriatic region in 2023 is EUR 8.5 million, which is the best result since the acquisition by Kofola in 2015. This result is extremely encouraging as it is almost EUR 1 million or 30% higher than in 2022 with a particular improvement in Croatia. Adriatic's revenue amount to EUR 63 million, which is more than 7% higher than '22. It is important to note that we started '23 with a new price list on the Slovenian and Croatian market, which drove the 12% increase in price compared to '22. We have implemented all the registration that comes from the Europe directive, which, of course, brought us also additional financial burdens such as the health cuts and tax for extended producer responsibility. We successfully launched the new functional segment, where we sold more than 1 million units, all markets combined, including an outstanding success story in Slovenia. Outside functional, we also launched new products, Oraketa [ merger ], a continuation of the Oraketa story; and Ora Pink Grapefruit. In '23, we were awarded 4 family-friendly company certification. And in the future, we will continue to implement all the measures. We also continue with the full enthusiasm with our sustainability projects, including tree planting, the Three Hearts Marathon with zero waste certification, reduction of sugar in products, reducing energy consumption. We managed to realize the project of setting up the first solar power plant in our -- on the roof of the production in Radenci, which will cover 11% of our own electricity needs. 20% of the investment was cofinanced by the Ministry of the Environment. We are extremely proud of the fact that Three Hearts Marathon organized by our employees was awarded by the [indiscernible] Prize in 2024, one of the highest national awards for work and achievements in the field of sport in Slovenia. In '24, our company is expected to continue to develop and grow with the refresh of the Oraketa brands, the redesign of Pepsi visuality and many other activities. Thank you. Marian.

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

Can you hear me? I'm Sorry.

Yes, we can.

Yes. I have 1 question. For the first quarter, you indicated 7%, respectively, 14% growth of volumes and values. Is it including February's CSAT? Or is it organic growth?

No, this is without February's CSAT. This is just organic growth.

[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.