Coca-Cola Europacific Partners plc Q4 FY2024 earnings call

Strategy Recap: Continues to deliver value creation, with 2024 being a solid year and diversification via the Philippines acquisition. Strong relationships with brand partners underpin the business. ### Performance Highlights: Robust top and bottom line growth, geographically diversified with APS's higher growth offsetting Europe's softer volumes. Comparable free cash flow was €1.8 billion, operating profit up 8%, and EPS up 6.5%. ### People: Partnership with London Business School upskilled over 500 executive leaders, top employer recognition, and inclusive culture with 9,000 new colleagues from the Philippines integration. ### Brands: Invested in brands, with innovation in packaging, flavors, and collaborations. ### Execution: Activation in-store and online, cooler placements, and enhanced digital capabilities. ### Sustainability: Retained CDP A List, MSCI AAA ESG rating, and investment in sustainability technology. ### Philippines: Celebrated first year with double-digit volume growth, 300 basis points value share gains, and accelerating CapEx plans. ### Indonesia: Stabilized post-geopolitical events, with restructuring done.

For Europe, volumes were down 2.4% (1.4% underlying) with revenue per case up 2.7%. Operating profit was up 8% with an operating margin of 12.9%. For APS, volumes were up 4.9%, driven by the Philippines. The Philippines had double-digit volume growth, achieving 300 basis points of value share gains, with 75% Sparkling and 50% NARTD share, and an operating margin expansion of around 200 basis points. Indonesia had volume impact from geopolitical events, resulting in a non-cash impairment charge.

2025 guidance includes revenue growth of approximately 4%, balanced between volume and revenue per case. Cost of sales expected to grow by around 2%. Comparable free cash flow is expected to be at least €1.7 billion. A new €1 billion share buyback program will commence imminently and be executed over the next 12 months. Mid-term objectives remain unchanged with confidence in delivery.

Geopolitical events impacting Indonesia's volume. Adverse weather, strategic delistings, and softer demand in the away-from-home channel affecting Europe. Uncertain tax positions affecting the effective tax rate.

Q: Can you give some color on why you’ve chosen to increase the free cash flow guide?

A: Ed Walker states it's due to increased confidence in the business to generate operating profit growth and convert to free cash flow, with over €1 billion of CapEx investment planned.

Q: Afternoon, Damian and Ed. My question is just on, I suppose, on the Philippines, Indonesia. So it’s sort of two in one really. But on the Philippines, I just want to get a sense of how you finished the year. You talked about solid trading in Q4 and you spoke overall about trends improving across or continuing to perform well in Q1, but just to get a sense of how Philippines is going and what your expectations are for the year? And then just on Indonesia, clearly, still a difficult market to operate in. Just be great to get an update on the boycotting situation about what you are seeing if you have seen any kind of improvement in the last weeks and months there?

A: Damian Gammell says Philippines had great finish, record volumes continuing into 2025 with high-single digit growth expected. Indonesia has stabilized, with certain areas showing high growth, route-to-market changes working, and a Sprite campaign for Ramadan.

Q: Good morning. Good afternoon. Thanks for taking the call – taking the question. I am hoping you could give some color on what you are seeing in energy, 6% change growth, you called solid or strong. But it’s certainly a slowdown from what we have seen over the past few years. Any color on energy as 2024 unfolded in your expectation for 2025?

A: Damian Gammell says energy was still a standout, continuing to lead, with expansion into new markets, Monster innovation pipeline, returning to high-single digit growth.

Q: Great. Thanks. Hi everybody. I know in the release, you flagged some away-from-home weakness in Europe. And so I would just like to talk a little bit more about plans to help support that channel this year, particularly in light of what remains a pretty stretched consumer backdrop and you have had a lot of other beverage companies broadly talking about the challenges in that outlet – that set of outlets.

A: Damian Gammell mentions brand innovation, cooler investments, digital campaigns, and new business wins to support away-from-home channel in Europe.

Q: Just coming back to the volume piece within Western Europe, I mean you managed to generate about 8% EBIT growth in 2024 despite European volumes down 2.5, nearly 2.5. And I know you don’t guide for volumes. But if you were to get a percentage of volume growth in Europe, would there not be quite favorable implications for EBIT, given some of the operating leverage that would kick off? And I am just trying to square that circle with regards to your 7% EBIT growth and your sort of higher free cash flow guidance as well.

A: Ed Walker and Damian Gammell explain it's early in the year, 4% revenue growth expected with more volume contribution, maintaining 7% EBIT guidance and free cash flow flexibility for investment.

Q: Hi Damian and Ed. My question is really around the pricing and promo strategy in Europe. So, I think you called out maybe some adjustments have been made in the away-from-home channel. But how are you thinking about the home channel? Is the mantra still to price in line with CPI despite a more favorable input cost environment? Any context there would be helpful.

A: Damian Gammell says pricing in line with CPI, using data analytics and in-market testing for promotional strategies, balancing price-sensitive and premiumization.

Q: Hey. Good morning or afternoon everyone. Can you hear me? Okay. Great. Sorry about that. Hey Damian, so maybe just kind of a bigger picture question. The time that since you have taken over as CEO, I think the enterprise value in the business has basically doubled. And also the free cash flow has effectively doubled as well. And I know over the course of the last, I guess three months or so with the potential for the addition of Fuze Tea, you have been introduced to a lot of maybe investors that you would have been introduced to. Actually, Sarah that’s probably done the bulk of that work. But – so can you just kind of give us some perspective on like what it would take to double again over the next 8 years? How much of it was acquisitions? How much of it was operational? Just trying to give people a perspective on how this business can actually compound returns.

A: Damian Gammell says organic growth through quality volume and revenue growth, leveraging marketing innovation, portfolio opportunities, and potential accretive M&A.

Q: Yes. Hi Damian, Ed and Sarah. Well, I have got a question on the balance sheet and the net debt to EBITDA, which I think has come down very nicely to 2.7x comparable EBITDA. And you have obviously announced a €1 billion buyback this morning. But I think on my numbers, even with that leverage might fall a little bit in 2025. So, can you just think or tell us through like how you are thinking about cash allocation over the coming years? I know you have got some up-weighted capital expenditure. But are you leaving some dry powder, maybe some M&A? It doesn’t sound like from the last answer you were. So, just how you think about the balance sheet over the coming years?

A: Ed Walker and Damian Gammell say aiming to stay within 2.5x to 3x EBITDA leverage range, leaving flexibility for M&A and capital allocation, with focus on organic growth and accretive M&A.

Q: Great. Thank you very much. So, Damian, one of the great, I think successes for the Coca-Cola system overall, which you guys play a very key role has been the greater coordination between the bottlers in Atlanta and the agility, the coordination on marketing, planning, obviously, incidents. And I am wondering if you could kind of maybe give us a little bit of sense of what sort of initiatives that the global system is doing, the sort of initiatives that Atlanta has been talking to you about as it relates to your business, both in 2025 and beyond. So, we get a little bit of sense of kind of the bigger picture and how you are participating in those initiatives coming out of Atlanta?

A: Damian Gammell says benefiting from new marketing approach, portfolio alignment, data insights leveraging, and innovation access from Coca-Cola Company.

Q: Hi. Good afternoon. Thanks very much for taking my question. I just had one on the Philippines, please. In your prepared remarks, you spoke about accelerating your CapEx plans in that market. And I just wanted to understand better what gave you the conviction to make that decision to accelerate the CapEx plans? And if you could also share more color on what that accelerated investment will entail as well?

A: Damian Gammell says accelerated CapEx due to Philippines' over-delivery in year one, including linear investment behind extra volume, cooler placements, technology, and systems investment.

Q: Thanks. Good afternoon Damian, Ed and Sarah. Just one question on, going back to the energy drinks category, two-parts question. First of all, can you talk a bit about the competitive situation in the category? I think Red Bull has introduced a bit more flavors last year. So, what’s the competitive situation? And the second point is, is the cost of growth increasing in that category?

A: Damian Gammell says competitive energy category with Red Bull innovation, healthy growth, no significant increase in cost of growth, and aim to grow and take share.