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

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

Dear investors, Martin Pisklak speaking. Today, we are reporting second quarter of 2025. From the results is, I think, visible that the trend of the negative results was continuing in the second quarter and also the outlook of the revenues in July and August, it's not very positive. However, we still believe that we are able to reach the lower range of the EBITDA interval, which we presented. And at the moment, we predict the full year EBITDA of Kofola Group on the level of CZK 1.9 billion. Also, I have to apologize for the mistake which we published yesterday in the report. In the slide for the goals, the revenue growth should not be 3%. We expect only 1.5% of revenue growth and also net debt-to-EBITDA ratio should be not 2.1x, as it was in previous quarter. But at the moment, we expect slightly above 2.5x EBITDA. After this conference call, we will publish correction of the report on our web page, so you can download the proper report. Once again, I apologize for this. And now my colleagues will continue and comment on the performance of the individual business segments.

Dear investors, here is Daniel speaking. Let me comment key moments in Czech and Slovak soft drink market. First half of 2025 was not successful period, and we had to report declining sales and profitability. Key factors are known. First, Slovak sugar tax and retailers front-loading CZK 75 million in 2024. Slovak sales dropped in Q1 more than 10% and in Q2, 8%. Second, end of cooperation with Rauch represents roughly CZK 200 million lower sales, partly replaced by innovations. There is not EBITDA impact. Three, I don't like many complaints, but it is a fact. We decided to face to negative market trends by innovations and huge marketing support. Marketing spends increased 26%. Extraordinarily successful was the launch of Targa Florio retail formats, Curiosa juices and Dilmah iced tea. We [ over-slugged ] in functional water category, which exploded and we are not present enough. Cost of material and services are under control. And top season, after successful June, including slower market recovery, soft drink market had worst season in this decade. It was not only cold weather, but negative consumer sentiment through all markets and categories. We react by cost savings program, but compensate huge sales drop in season is difficult. Thank you for your attention and better information next time.

Hello, everyone. This is Marian Sefcovic, CEO of Adriatic speaking. In the first half of 2025, the Adriatic region recorded a solid 5% year-over-year increase in revenues. This growth was mainly supported by higher sales in Slovenia, plus 4% and a 5% increase in export markets. In the second quarter, we observed a noticeable rise in demand and consumption, especially in June when the region experienced a prolonged heat wave. However, this revenue growth did not proportionately reflect in EBITDA, mainly due to higher operations costs from increased brand investments and rising personnel expenses following minimum wage adjustments. We successfully launched new flavor under the Ora and Radenska brands, Ora Tangerine and Radenska Blackberry Lime and also a new flavor of Oraketa Elderflower Lime. Our Studenac campaign won 8 awards at the day of communication festival, including Effie. Oraketa won second place for rebranding the BalCannes competition. At the international evaluation, 14 of our beverages received medals, including Grand Gold Medal. We ranked second on the VALICON top 25 list of the most trusted FMCG brands in the region. Sustainability efforts continue with the organization of the 3 hours Marathon, the biggest sport event in the country with zero-waste principles. We supported BioBlitz Slovenia, where over 70 experts, biologists from 4 countries recorded 500-plus species around our wells, which is a strong indicator of a clean and healthy environment. .

Thank you, Marian. 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 second quarter of 2025. The slower start to the summer season impacted overall consumption in the Czech beer market. Despite this, our domestic revenues held steady compared to 2024, supported by the new pricing policy we introduced in Q1. We continue to invest in our brands with a particular focus in Q2 on the rejuvenating Zubr. This year, Zubr became the official beer partner of OKTAGON MMA in the Czech Republic, and we unveiled its refreshed design and marketing campaign at OKTAGON's flagship event in Prague's Eden Arena. Additionally, we expanded our portfolio with 4 new products in the fast-growing nonalcoholic flavored beer segment. On the export side, revenues declined as we prioritized margin improvement and scaled back lower value private label business. Taking Czech and export markets together, these dynamics led to an overall 7% beer revenue decrease in Q2. The combination of softer domestic demand due to cooler weather and the ongoing restructuring of our export business continued to impact the rest of the season. 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.

Ladies and gentlemen, now it's time for your questions [Operator Instructions]. We have the first question from Mr. Bartek, please go ahead. [Operator Instructions] We have a question from Mr. Raška, please go ahead.

I would like to ask what is the main reason of the drop in exports in the beer segment.

Thank you for this question. Basically, there is the same reason as the last quarter. From the 1st of January 2025, Russia introduced enemy tax on the beer, which is produced in European Union. And from that time, we see the significant drop in our sales number. So basically, we realized that part of the distributors, which we have, for example, in Poland or other European countries were exporting our beer to Russia. And because of this enemy tax, this export basically disappeared. So our distributors in this country started to purchase lower amounts, and that's very visible in our number. We are not exporting and we were not exporting our beer to Russia directly. But we were aware that there are some reexports because our beer was visible on the shelves in Russia. So at least we identified who are the exporters to Russia.

Mr. Bartek you can click on the unmute me icon and go ahead.

I have two. First, related to the guidance. If I calculate correctly, the guidance still implies even after the reduction around 9% or 10% increase in revenues in the second half of the year and well over 20% increase in EBITDA. So how should we perceive that? Is there any one-off effect or how we want to achieve such an increase? And second, maybe more towards 2026. I guess you are at the beginning of contracting the sweeteners for the next year. So if you can elaborate on what you see in the market, what would you expect for the raw material prices for the next year?

Thank you for your questions. Let's start with the sweeteners. At the moment, we are at the very beginning of the negotiations. What we see at the moment is that there will be most probably a slight increase of the sweeteners prices, but nothing significant. So there should be no such a significant fluctuation, as we were used to in the past, let's say, 4 or 5 years. We expect like a slight increase up to 10%, I would say, at the moment. But as I said, we are at the very beginning of the negotiations. Regarding the second half of the year, yes, it seems that the second half of the year projection, it's very optimistic in the light of the current results. Basically, we see some 3 major reasons for such optimistic like second half. First one is basically our like -- as also Daniel Burys described, cost saving program. So basically, we are reducing significantly now the investment to the market in terms of marketing and commercial promotions because we invested really a lot in the first 2 quarters. So some kind of cost savings is the first like part of the way how we should do it. Second fact is that we do not expect floods in September and October this year. So hopefully, the sales in September and October will be more normal compared to prior year. I just would like to highlight that a lot of -- the regions, especially the Northern Moravia, where we are extraordinarily strong in terms of sales, was heavily impacted by the floods. So this year, it should be much more normalized. And the reason for the better result in the second quarter is the fact that we will consolidate almost 5 years -- 5 months of the [indiscernible] result, which can be approximately, let's say, EUR 1 million, a positive impact to our financial results. And also there is a very strong result, which also should contribute more than EUR 1 million of General Plastic compared to prior years so -- which is investment where we have 33%, and we are consolidating this investment using equity method. So altogether, let's say, new acquisitions and improved profitability of General Plastic together should bring us some like CZK 50 million. And openly speaking, this should replace the, let's say, one-off effect of the presales related to sugar tax, which were especially in the last month of 2024. And for second -- basically half quarter will be much more about reducing the costs and better sales in September and October compared to prior year.

Maybe one more question. In your presentation, you have a dividend policy to pay out CZK 300 million or CZK 14.5 per share, which is lower than the CZK 21 paid from last year profit. Should we take it as a kind of a floor or we are just considering a return to the previous dividend policy?

Yes. At the moment, you should take it basically as a floor. As indicated, it should be equal or higher than CZK 13.5 per share. So we will consider the dividend payout after full year result. At the moment, I do not expect that we will pay some advanced payment for the dividends in 2025, and we will do the full decision in 2026 based on the full 2025 results.

[Operator Instructions] We have another question from Mr. Bartek.

Sorry, one more follow-up question to the General Plastic contribution. You say it's equity consolidation method. So it will appear in EBITDA or not?

Yes, it will appear in EBITDA. It's basically that 33% of General Plastic EBITDA is appearing in other operating income basically. So it's included in the EBITDA, yes.

And the operation -- it has started in the beginning of this year, and it's ramping up? Or how should we see that?

Yes. Basically, we are like -- we are active in General Plastic, I think, like more than 3 years already. All the time, the General Plastic results were very flat. This year, they are increasing significantly because of the improved production process, we invested a lot. We have a line for rPET. And so we are like using rPET. We have a special line for like cleaning the PET bottles, which were returned from the Slovak market. So basically, this now like showing the real effectiveness of the plan and the profitability is increasing. So basically, approximately, let's say, EUR 1 million should be the jump in profitability, which is equal to our like share in the company.

[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.