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

Ladies and gentlemen, welcome to Kofola's First Quarter of 2024 Results Conference Call. You will now hear a recording presented by the group CFO, Martin Pisklak with a summary of the group's results. This will be followed by business insights from Czechoslovakia and Adriatic, presented by country CEOs, Daniel Burys and Marian Sefcovic.

Please let me comment on very strong first quarter of 2024. We successfully finished acquisition process of Pivovary CZ Group, MIXA VENDING and Libina apple orchards. All 3 companies are important cornerstones in new segments, which we missed in Kofola Group. And their financial impact is already visible in the reported numbers for the first quarter. Group revenue increased by more than 22%. Group EBITDA was following this trend and totaled CZK 265 million. Due to finished acquisition, net debt-to-EBITDA ratio increased to 2.7x. Business wise our -- all our 3 segments growing. Worth mentioning is especially Fresh & Herbs segment. First time in history, the LTM revenues of Fresh & Herbs segment reached CZK 1 billion. Thank you for your attention.

Dear Kofola friends, here is Daniel speaking. I'm responsible for Czech and Slovak soft drink business. Let me briefly comment Q1 results. We realized single-digit price increase due to Czech VAT increase and Slovakia DRS industry fee. We can enjoy positive macroeconomic sentiment in household consumption, and we can report volume growth after 4 years. First quarter sales, plus 10%, and volume increased 6%. Strongest dynamics up to 20% we can report in Kofola, Semtex and Ondrášovka brands. We are properly prepared for top season. We successfully launched all our innovations. My favorite is currently functional, actively supported by known popstar, Dara Rolins. Costs are under control and supply chain situation seems stabilized. Q1 business EBITDA increased 8%, excluding management option planned recalculation. We analyzed Slovak sugar tax implementation from January 2025. Tax will be the highest in Europe, and market impact will be very negative. But our strong brands will manage, come on. I could briefly comment April, May, continuing growth, very successful months in spite of rainy weather and no tropical days. Thank you for attention and drink of Kofola. Daniel?

Hello, everyone. This is Marian Sefcovic, the CEO of Adriatic speaking. Adriatic has made an impressive start to 2024, reporting double-digit revenue growth across key markets in Q1 2024. Sales were up 12% in both Slovenia and our export segment. We did a perfect 15% increase in Croatia. Our sales volume exceeded plan, mainly due to excellent commercial execution, including the successful launch of new products and brand redesign. Of course, also weather was not on our side. We successfully launched 2 new flavors in the functional [indiscernible] segment, functional [indiscernible]. The transition to the new visual identity of the Pepsi brand was also very successfully implemented and accepted by consumer in both markets. We also successfully launched a completely renewed recipe and packaging for our brand, Oraketa. EBITDA also improved in Q1 versus last year by more than 20% in both countries. This was enabled by stabilized raw material and energy prices. Also April has continued to bring our expected exceptional results with again double-digit growth in Adriatic as a whole. We are confident that with a good start to the year of 2024, before the season, we are well prepared to achieve year targets. Thank you. Marian.

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

If I may, the [indiscernible] EBITDA actually declined. So if you could comment a little bit on that, what was the reason that I saw the performance is the HoReCa segment was relatively slow? So if you have any insights into that. And how it actually looked like in April and May or in the second quarter as a whole where it continued? And also, if you can provide an update on the material input costs, how it's developing with sugar and the [indiscernible].

Sure. Thank you for your questions. So regarding the Czechoslovakia, business-wise, the EBITDA in Czechoslovakia is increasing, approximately by 10%. The drop, which is visible in the presentation, is related to revision of option scheme program because we added some new participants and we recalculated based on new discount rates. So, therefore, we are recording some additional provision for these option scheme into the P&L. And that's why -- and because the majority of the people included in option scheme are from the CzechoSlovak segment, so this impact was quite strong in the first quarter. And that's why it seems that the EBITDA is dropping compared to prior year, but in reality, the business EBITDA is increasing compared to prior year. I would say in the same manner as we are like increasing in other segments across the group. Regarding the question for the April and May result, so also from the presentation, which we published yesterday, it's visible that the trend is very positive also in April and May. In April, basically, we recorded volume grow by 18%. May was a bit weaker. We recorded a drop of 4 percentage points. But the important thing is that, in May, the weather was not perfect in Czech Republic and Slovakia in the main market. And also the very high sales in March and April were just slightly compensated by this weaker May. So altogether, results are so far, in 2024, very strong. We are still like growing volume wise, which is very important. As Daniel Burys commented in his presentation, we already see first signs of economic recovery in Czech Republic and Slovakia. And we believe that this trend will continue also in the rest of the year. Regarding your question for the material input prices, so far, we do not see any significant fluctuations in the price or any like significant trends. The sugar price is basically very comparable to 2023 price, so no major deviation in sugar. The PET resin is slightly cheaper. Of course, that's a good news and to save the rPET currently. But still, currently, the price for PET resin is over EUR 1,000 per tonne. So it's not that cheaper as it was in the past.

Maybe could you provide a figure for the stock option program? How much it was success to have stock pricing option?

Like the -- if I look on the CzechoSlovak segment, which we presented, so basically, we presented that the Czechoslovakia segment dropping EBITDA by CZK 10 million. If I exclude the stock option scheme so the CzechoSlovak segment would increase by approximately CZK 10 million. So let's say, CZK 20 million is the impact.

We can see that Mr. Raška wants to ask a question.

Can you hear me?

Yes, we can.

It seems that the contribution of new acquisitions in the first quarter was rather significant. Can you give us some picture about operating results of Pivovary CZ and MIXA VENDING in 2023? And what is your guidance for this year? So we know that Pivovary had a quite successful year, 2022, with EBITDA CZK 220 million and with a good EBITDA margin of 19%. So assumption for exceeding this level this year.

Thank you very much for your question. We still did not finish the full forecast for this year for the brewery. So at the moment, I will not comment on the expected performance on brewery and MIXA VENDING. Please give us some time. We will give you more information in the presentation for the second quarter when we include also more specific information about the breweries and MIXA VENDING in new segments. But what I can say, so far, both acquisitions are like -- we are very satisfied with the development so far. Breweries are doing very well. Their volume increase compared to prior year is even higher than the one we are reporting in Kofola, and the same, MIXA VENDING. I think it's reporting very promising number for us. So far we are very satisfied. There are no issues with the integration of these 2 business segments into the Kofola Group. And after the second quarter, we will provide you also in the presentation more specific information on these new segments.

Mr. Bartek, do you have any other question? [Operator Instructions]

One follow-up question to the development in Czechoslovakia. Actually, I was looking at the volumes in the on-premise segment, in the restaurant segment, they were dropping quite a lot in the first quarter. Revenues were growing, but volumes are dropping. So if you have any comments to this development in restaurants, how it looks like there?

Basically this -- yes.

And one more question to the acquired businesses. If I calculate correctly, the last 12 months EBITDA of the acquired business is like CZK 170 million, CZK 180 million, is that correct? And also, if the leverage which you reported now is final or if there are any remaining payments or something like that?

Okay. So first, the on-premise segment in Czechoslovakia, basically, this is mainly the reason of very weak winter. So the winter was not as we expected. It was lack of the snow on the mountains and so on. So this is visible also in the HoReCa number. In Croatia, the first quarter of the year is so small in terms of HoReCa business that we do not consider this like a drop of volumes or this variation like the significant one. It will depend on very few customers, which are active during the winter in Croatia. Then, regarding the LTM EBITDA of the new businesses, for sure, the LTM EBITDA is over CZK 250 million, if I put it together. Both breweries, and MIXA had a very good year 2023. And last question was to the remaining payments, we still have to pay some minor earn-out related to brewery acquisition. But as we have -- in our guidance, we do not expect that our like leverage will increase above 3x EBITDA. I would rather say that it will remain very safely below 3x EBITDA. So 2.7x is like a reasonable expectation also for the rest of the year.

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