Coca-Cola HBC AG

Good morning. Thank you for joining the call today to discuss Coca-Cola HBC's half year 2021 results.

Zoran and Ben will present the results and following that we will open the floor to questions. We have about 1 hour and 15 minutes available for the call today and we will therefore ask you to keep to one question and one follow up before joining the queue again.

Before we get started, I would like to remind everyone that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements on the screen.

This information can also be viewed in our press release issued today. Now let me turn the call over to Zoran.

Thank you, Joanna. Good morning, everyone and thank you for joining the call.

Before we get going, I want to flag the announcement just made on our agreement to acquire Coca-Cola Bottling Company of Egypt. We wanted to announce this alongside our results but that simply was not possible as we were finalizing the last but critical details of the transaction.

We're very excited about the opportunities we have in front of us in this market and I'll discuss this in greater detail shortly. Let me then give you an update on strategy, the CCBCE acquisition plans, and business performance in the first half of the year, after which Ben will talk you through the financials in more detail before handing back to me for some comments on the rest of the year and beyond.

The numbers we released this morning show a strong recovery across all aspects of our business. H1 like for like revenues were up 23.1% year-over-year.

Very importantly, revenues were 4% above H1 2019 levels, and volumes 5% above on the same comparative basis - giving us confidence about progressively returning to normality following the disruption caused by COVID in 2020. Year-to-date we have gained 50 basis points of value share, improving the performance from 2020.

Meanwhile, EBIT margins expanded 340 basis points while EPS is up 82%. The agility with which the business has been able to respond to the reopening of our markets is clearly visible in the strength of our financials and the continued expansion of our value share performance.

This has been enabled by the bold investments we have made into capacity and prioritized capabilities to deliver best in class execution, be that new lines in Nigeria or digital tools to allow our sales people to offer our customers a more targeted, better service. This is also fueled by our tight partnership with The Coca-Cola Company team, and our aligned and effective way of doing business.

We continue to invest in our sustainability commitments; launching 100% recycled packaging in mineral water in Czech and Slovakia, which adds to our existing portfolio of 100%, recycled Water brands. In Q2 we also added 100% recycled sparkling single serve packs in Italy.

The pandemic is not yet behind us. In this operating context, the safety of our people and ongoing service of our customers remains central.

The people of CCH have shown continued commitment and care and I am also proud of the speed and adaptability I witness in this business every day. I want to thank them wholeheartedly, it's inspiring to see, and I'm excited for us to continue growing together with our customers, creating value for our stakeholders.

In 2019, we laid out a clear strategy to drive the business towards our vision of being the leading, 24/7 beverage partner. This strategy is called Growth Story 2025 and it is under-pinned by 5 growth pillars.

Leveraging our unique, 24/7 portfolio; winning in the marketplace with our customers; continuing to focus on efficiency and fueling investments with careful prioritization; developing our people, particularly by accelerating critical capabilities; and earning our license to operate by delivering on our Mission 2025 sustainability commitments. These pillars are positioning the company for sustained success.

They have guided our investment choices and actions and we are making very good progress. I believe that continued focus on this strategy over the last 2 years has readied us for the strong performance we are now seeing in the recovery.

Let me give you an update on the trends we are seeing during the first half of the year. The easing of restrictions across our markets during Q2, combined with increased mobility, is fueling a strong recovery in the out-of-home channel and 'on-the-go occasions'.

Volume growth in out-of-home accelerated sharply in Q2, and we have seen that while volumes in that channel remain slightly below 2019 levels, the gap narrowed in the second quarter. Given the constrained capacity in the hospitality sector, this suggests a healthy underlying demand for available out-of-home experiences.

While we continue to monitor new emerging variants, we are also cautiously optimistic for much of this positive momentum in the out-of-home channel to continue throughout the summer months and into Q4. Throughout the pandemic, we have worked hard to support our out-of-home customers - sharing our consumer insights, providing targeted program and offering practical support.

This has ensured they, and we, are well positioned to capture the growth opportunities together as markets reopen. Even as the out-of-home channel has reopened, we have continued to deliver a strong performance in the at-home channel.

We are benefiting from favorable comparatives in Q2, but looking at the performance on a two year stack, it is reassuring to see volumes consistently high-single digit to mid-teens ahead versus 2019. We are seizing opportunities around premiumization in the at-home channel.

Consumers have developed rituals, recreating out-of-home experiences in their houses and we believe that some of these trends will stick, propelling our performance in Adult Sparkling. As a company we have been focused on selling increasing volumes of high-value single-serve packages for many years.

Our track record is confirmed by improved single-serve mix - which we grew by over one percentage point per year between 2015 and 2019. In 2020, COVID negatively impacted that by limiting volumes in the out-of-home channel where single-serve packs predominate.

In 2021, we are seeing that the recovery in the out-of-home channel has driven a quick turn-around in package mix, which in turn, is helping to drive healthy price/mix. Through deliberate actions, we continue to fuel single-serve consumption.

We consciously focus innovations on single serve formats, while in the at-home channel we have targeted growth in multi-packs of single serves. These package formats grew by 18% in the at-home in H1.

What is particularly notable and encouraging is that single serve mix in H1 is already1.8pp above the 2019 level, even without a full recovery in the out-of-home channel. Careful prioritization of the opportunities across our 24/7 portfolio continues to drive momentum.

The Sparkling category was resilient throughout the pandemic and now, as we are seeing markets recover, volume growth is accelerating further. Activation of the most valuable, high-potential occasions such as Coke with meals across our markets is bringing strong results.

Trademark Coke volumes are also benefiting from the roll out of the new Coke Zero which was launched in April and is now available in 24 of our markets. Growth is broad-based across brands, with Fanta volumes up 17% and Sprite up 22%, but we are also really pleased to see the strongest performance is from our strategic focus areas, namely low and no sugar variants and adult sparkling.

Low and no sugar now make up 22% of Sparkling category volumes and are growing faster than full sugar across the segments. We see no signs of slowdown in this performance.

In adult sparkling we focus on the key occasions of socializing, both at-home and now also out-of-home. We have a well-established play book, developed with the Coca-Cola Company team, to elevate the position of Schweppes and Kinley in the market through new visuals, packaging, flavors and execution, which builds on the product as a premium mixer.

Energy closed with exceptional results: volumes up 66% in H1. Here we are benefiting from the continued pace of innovation in the category as well as the range of our portfolio which effectively targets the most attractive market partitions: mass premium with Burn, mass with Monster, as well as an affordable offering with Predator.

We continue to make progress on rolling out Costa Coffee which is now live in 16 markets. We are building depth and breadth of distribution in the at-home channel in our markets and seeing good early results, with Nielsen data showing clear progress in Q2 versus Q1 both in terms of share as well as distribution.

However, the at-home is only a part of this opportunity. Having had the experience of selling a full portfolio of coffee in several of our markets through our previous coffee partnership, we believe we are uniquely positioned as a partner of The Coca-Cola Company to target all channels across our markets with Costa Coffee.

We believe we can offer a breadth of portfolio as well as level of service, enabled by technology, to our out-of-home customers that is compelling. Early feedback and take up is good and we are accelerating the roll out of Coffee in the out-of-home channel in 2021.

We are also delighted to have strengthened our coffee portfolio with an agreement to acquire a 30% stake in Caffè Vergnano, one of the oldest Italian coffee roasters with an exceptional product and brand, and a truly premium positioning. As part of our minority stake, we will acquire exclusive rights to distribute Caffè Vergnano in all of our markets outside of Italy.

We intend to hit the ground running by early 2022. You will have seen this announcement on our expansion into Egypt with the acquisition of CCBCE.

We are excited to welcome this growth market to our group. We see huge potential for Egypt.

The country has Africa's second largest NARTD market by volume with very attractive demographics. To put that into some context - with the addition of Egypt, CCH would have access to the two largest NARTD markets in Africa and a combined 25% of the population of the whole continent.

The acquisition would increase the population we serve by 100 million, taking it to a total of 715 million people. We also see opportunity to accelerate growth by increasing the penetration of our products and per-capita consumption.

CCBCE is currently the number two player in the market allowing room for further share expansion. The business has achieved volume growth of 5% CAGR over the past decade and we believe there are significant opportunities to unlock further growth and value creation for all stakeholders through deploying our best-in-class execution capabilities, commercial expertise and leading approach to sustainability and communities.

You will have seen some of the key financial metrics on the release. Let me highlight that while we expect this acquisition to be accretive to EPS in the near term, we also believe there is an opportunity to create further value by moving CCBCE's margins towards our Group average over time, predominantly through seeing operational leverage as revenue expands.

We expect the transaction to close in late Q4 and look forward to being able to share more on our plans in the future. Moving from one growth market to others in the Emerging segment.

We continue to see sustained, strong performance in the Emerging segment with like for like revenue up 30.3% in H1. Emerging market FX-neutral revenues are now 19% above 2019 levels.

We are benefiting from continued momentum in Russia and Nigeria, as well as the recovery seen in several other markets, such as Romania and Serbia, where the return to trading in the out-of-home has accelerated results. Nigerian volumes continue to expand double-digit, growing over 30% in the first half.

We are seeing underlying strength in the categories where we play, but importantly we are growing ahead of these categories and we accelerated our share gains in Q2. We're also pleased to see the healthy price/mix trajectory in the market in the first half.

As we have been investing to build both capability and capacity in Nigeria over several years. This investment is set to continue to unlock the potential of the market.

In Russia, we are delivering like-for-like growth of in the mid-20s, led by Sparkling where growth was nearly 30%. We continue to believe that Adult Sparkling is a real opportunity in this market with Schweppes volumes up over 60% in the first half.

This strong performance is a result of targeted investments to elevate the Schweppes' offering and we anticipate significant headroom for the brand in Russia, particularly when activated alongside premium spirits. Energy is also a notably strong performer with volumes up nearly 60%.

The Developing segment's currency-neutral revenue increased by 17.6% with price/mix expanding 16.9%. Developing segment FX-neutral revenues are 2% below 2019 levels.

Performance was impacted by the Polish Sugar tax. Excluding Poland, the segment's rice/mix growth was 5.6% as package and price mix improved.

Poland's performance is evolving in line with our expectations following the implementation of discriminatory taxation. We experienced some recovery in Q2 volumes as prices settled in the market.

We are also pleased with the market share gains and the excellent performance from low and no-sugar variants which were up 36% in the period. This all gives us confidence that our mitigation strategies, including pricing and promo adjustments, are allowing us to handle this tax in the best possible way.

It is helpful to look at the performance of the segment excluding Poland where this tax is the key driver of trends. The markets excluding Poland saw volume growth of 11.5% benefiting from continued good results in the at-home channel and the reopening of the out-of-home.

Established segment FX-neutral revenues grew by 16.6% and are now 8% below 2019 levels. The segment benefited from the reopening of the out-of-home channel which started in most markets in May.

Performance was led by the recovery in Italy where we saw better momentum in Q2 with volumes towards the end of the period exceeding those in 2019. By contrast, Greece's recovery in Q2 has been impacted by ongoing weakness in tourist arrivals.

We are pleased by the continued positive momentum in price/mix which was up high-single digits in Q2. We are benefiting from better package mix as the out-of-home reopens ongoing good category mix as well as pricing.

As we see recovery in our markets we are also ensuring that we continue to meet the key milestones on our Mission 2025 sustainability commitments. During the first half, we have made progress on our packaging agenda with investments in recycled PET production.

I already mentioned our launches of new 100% recycled PET packages. We have also swapped plastic shrink wrap on multi-packs for a paperboard solution called Keelclip in10 of our markets with plans to roll this out across all our EU markets by early 2022.

This progress on packaging is a critical part of how we will meet our bold science-based emissions targets since packaging is the single largest contributor to emissions in our value chain. I will now hand over to Ben to take you through some more detail on the financials.

Thank you, Zoran, and good morning everyone. In line with our practice, unless specifically stated, I will refer to comparable figures which exclude the impact of restructuring costs, the mark-to-market valuation impact of commodity hedges and specific non-recurring items.

Zoran has already taken you through our top-line performance, so I will just recap the highlights before digging into the drivers of our profitability and cash flow. Like-for-like volume accelerated in Q2, up 26.5%, ensuring that we close the first half above 2019 levels.

Price/mix also improved markedly in Q2. Here we are activating all the levers: a healthy category mix amplified by a sharp recovery in package mix.

We have now successfully taken pricing in over 90% of our markets. All of this drove price/mix up 6.2% in H1 or 4.4% excluding the price increase we made in Poland to offset the discriminatory tax on beverages.

Like for like revenues expanded 23.1%. Let me take you through the bridge back to reported euro revenues.

Foreign exchange translation had a negative impact of 6.1 percentage points and the reorganization of the structure of the Multon juice business in Russia further decreased revenue growth by 2.3 percentage points, taking reported revenues to €3.2 billion, a 14.7% increase on the prior year period. First half gross profit margins were down 70 basis points year on year.

This was in line with expectations considering that in 2020 our gross profit margin benefited from the combination of lower commodity prices and opportunity to hedge the Ruble at favorable rates at the start of the year. Our base case for 2021 was that the commodity and FX environment would pose considerable headwinds, and that is indeed what is materializing.

It is worth noting that there are two one-offs in the gross profit margin which have a net impact of negative 20 basis points and which are detailed on this slide. The first is the Polish Sugar tax.

We pay this tax out of COGS, with the result being that revenue is inflated by the quantum of the tax with minimal impact on gross profit. The result is a mathematical reduction in margin due to a higher revenue number in the denominator.

This had a negative impact of 70 basis points on Gross Profit margin in H1 and we can expect a similar impact in H2. The second is the extension of the useful economic lives of some of our production assets.

The impact of that has been lower depreciation with a benefit of approximately 50 basis points on Gross Profit margins. Leaving these 'one-offs' aside, we are pleased to have seen the benefits of positive production and overhead leverage as well as ongoing productivity initiatives in our supply chain which are driving continued efficiencies over time.

We also benefited from the strong improvement in price mix as well as our solid hedging policy in H1 which helped to ensure that raw material costs per case were up only 2.3% in the period. Moving to OpEx.

We have been able to keep it flat versus 2020 during the first half - even as revenue expanded 23%. I'd like to reiterate the message that we expect to retain €15 million to €20 million over the full year of the €120 million saved in 2020.

And while in 2020 the cost saves were delivered with equal weight in H1 and H2, in 2021 we would expect the return of these costs to be in H2 as we step up marketing investment and items like travel resume as mobility improves. Turning now to the margin drivers on a segmental basis; we have seen the fastest expansion of margins in our Established markets due to strong operational leverage as revenues recovered.

In the Developing segment, that underlying margin improvement driven by operational leverage was partially offset by the negative impact of approximately 2 percentage points from the Polish Sugar tax. The Emerging market segment continues to see strong margin performance as sustained top line growth is driving consistent operational leverage.

At a Group level, comparable EBIT increased by 67.8%, driving a 340 basis point increase in EBIT margins. We are pleased by this strong performance but also aware that it is partly driven by the aforementioned cost savings we retained in H1 which we expect to return to the business in H2.

We also face a much more challenging comp on gross profit margins in H2 as well as higher commodity prices. As a result, while we expect that we can achieve a 20-to 30 basis point EBIT margin expansion this year, that implies that the second half 2021 EBIT margin will be below second half 2020 EBIT margin.

The strong performance in H1 on EBIT, combined with broadly stable finance charges and tax rate drove EPS up 82% Free cash flow improved markedly, driven by the higher profitability and another improvement in working capital. CapEx of €218 million reached 6.7% of revenues.

We will continue to invest behind capacity expansions in selected markets and categories, cooler placements which are a key driver of improved single-serve mix and also our digital agenda. We will also allocate investment to our sustainability commitments, for example our in-house recycled PET lines.

Finally, our growth plans for Coffee will require investment, although this is a very small proportion of overall CapEx. With all of these opportunities we expect to be at the upper end of our CapEx guidance range for the full year 2021.

Our net debt-to-EBITDA position at the half year point was at 1.1x. Assuming that the acquisition of Coca-Cola Bottling Company of Egypt goes ahead in Q4 as planned we expect the balance sheet to be within the 1.5x to 2x range by year end.

With the continued strength of the balance sheet we retain a lot of optionality for our capital allocation priorities. We've already discussed organic investment.

Our second priority is our progressive ordinary dividend policy. We target a payout ratio of 35% to 45%.

In 2020, in order to keep increasing the dividend in a year impacted by COVID-19, we were above that target. We expect to maintain the progressive nature of our dividend in the future, while also seeing that payout ratio move back into range over time.

Our third priority is value creating M&A. You have seen good examples of the two main types of opportunity for with both CCBCE and Caffè Vergnano.

We remain interested in either selective bolt-on acquisitions of strong local brands to complement our existing portfolio or expansion into new markets as and when that is a possibility. Of course, investment discipline remains central.

We will only invest if it makes strategic and financial sense and as we are happy to return capital to shareholders in the event that we do not see value adding opportunities on the horizon. With that, let me pass the floor to Zoran for the year's outlook.

Thank you, Ben. We are encouraged by our strong H1 performance and, while conscious of the risks, remain cautiously optimistic about the rest of the year.

We continue to expect a strong recovery in FX-neutral revenues and we now believe that we can achieve an EBIT margin expansion of between 20 to 30 basis points in FY2021. Looking further ahead, beverages continue to be a high potential industry and we see many growth opportunities leveraging our evolving portfolio.

We are also blessed by the markets we operate in and now expect to be able to add another growth market to the Group. This is why we do believe that once trading conditions normalize the business can return to the growth algorithm we set out at our Capital Markets Day in 2019, which was for FX-neutral revenue growth of 5% to 6% with 20 to 40 basis points of EBIT margin expansion per year on average.

Thank you for your attention, I will now hand over to the operator, and Ben and I will be happy to take any questions you may have.

Good morning, Zoran and a couple of questions from me, please, just on the transaction to begin with. Can you give us a sense of where EBITDA and EBIT margins were for the Egyptian Bottlers for last couple of years?

Just trying to work out the transaction multiples here. And how quickly do you think you can get margins of the group levels?

That's my first questions, please.

Thank you, Sanjeet. And once again, to you and everyone else, thank you for understanding that we send the press release, literally at the start of the call.

But we really wanted to ensure that literally the moment it was done, that we share it with all of you, because we really didn't want to delay and miss the opportunity of this call on. First of all, on the margins, which I highlighted that are lower than our group EBIT margin.

Therefore you could see from the press release, example of net-net profit, which is in between mid and high single digit millions, we expect that with this growth story, and growth opportunity that we see in Egypt, that progressively over the years, we will be taking it to the group average, and hopefully also beyond. We see a number of actions that I can go into more details.

But I just want to emphasize that this acquisition is not cost synergies type of acquisition, but rather fueling and supporting the acceleration of very important business, given the underlying conditions as well as already the setup that this business has. So myself and the whole team are quite optimistic about taking it progressively over the years with all actions we plan to do.

Got it. And do you have an EBITDA multiple combined, you're able to share it the stage based on the earnings, the business generated last couple of years.

And my follow up question is just really on the input cost outlook, if you're able to just give us a feel for the magnitude of that raw material cost inflation as we think about H2 and more importantly 2022? Thanks.

Yes, Sanjeet. So the multiple of the deal is around 10.

And then I'll hand over to Ben for the second part of the question.

Yes. Thank you, Sanjeet.

It is early to provide guidance for 2022; we will do that during the 2021 full year results. Our midterm algorithm FX-neutral revenue growth in the 5% to 6% range accompanied by 20 to 40 basis points of EBIT margin expansion per year on average, to make some change.

We believe that the business and its capacity to continue to invest and grow the top and the bottom line, even as the operating environment become more challenging. And while we expect input costs to be higher in 2022 then they will be in 2021.

We believe that the combination of driving the top line through category mix, package mix, pricing, the discipline that we have demonstrated managing the cost base to help us stay on track with our targeted margin growth in 2022.

Oh, hi and good morning, and thanks for taking the question. I'm just really wanted to discuss the fact that you were able to grow your volume as the markets reopened while still holding your costs down so much.

I appreciate this is not going to continue into H2. But could you talk a little bit about what enabled you to do that because it's quite impressive to my mind.

Thank you.

Thank you, Alicia, I'll kick it off. And then Ben will jump in with anything that he might have additionally, you might remember we also said when we entered into the year that we did estimate and read that Q1 will be as we call the read we expected that Q2 will be orange or amber and then that progressively second part of the year will be green.

Therefore, we have planned that our cost will be and need to be much tighter in the first half. And that's exactly what we have done.

And I would say giving credit to the team, that we have done that very, very diligently. Because we have seen that actually, Q1 had even spillover of the measures into the start of Q2.

And exercising again, the algorithm and an agility of managing our costs in terms of what we see in the market, this is where we have been really holding on until we get better visibility. And for that reason and what we have seen since the second part of the Q2, where we are also today, even though we are mindful that a lot of things can still happen by the end of the year, however, we do see the need, and we want to invest more in the second half to support the business for the rest of the year, as well as for the next year.

And that's why it's been highlighted we will be investing much more costs across many areas for the rest of the year. Ben, anything?

Thank you. I think, Zoran said it very well, we are pleased with the cost disciple in the basis, and we have adapted ways of working, resulting in lower headcount.

To give you a sense, in June, this year, we have over 1,000 FPS less than what we have in June 2020, we have also maintained pre-controlled inflationary expenses to finish H1 with OpEx again, practically in line with last year completely flat, no one standing that there will be an increase in revenue and marketing expense. As we look into the second half, Zoran rightly said we will step up that brand investment partnership with a corporate company to sustain top line recovery near term and support the long term health of our unique 24x7 portfolio.

Thank you, if I could have a follow up on Nigeria has been very strong and continued to be in the latest quarter. Can you talk about the outlook there over the sort of near to medium term?

Apology, Alicia, you said outlook for the rest of the year.

Yes. For Nigeria, yes.

For Nigeria, absolutely. So, listen, as you see not only this year, but also building on momentum of the last year, we've been performing very well.

And I expect that Nigeria is going to continue also in the second half performing on a strong note. So that means that there's going to be continued double digit performance.

We see that also from the current rating and the overall even though there is some of the - in line with Nigeria being a true emerging market. There always are certain uncertainties.

However, from today's visibility, we have every reason to believe that the rest of the year is also going to be on our strong double digit note.

Good morning, everyone. So my first question is really designed on Egypt.

Congrats on the deal. I was hoping if you could talk about some of the opportunities in the broadest terms that you've identified on top and bottom line in terms of the best practices you can bring from your business over to Egypt.

And it's sort of part of that same question, it's a slightly different setup to your current footprint, where you've got incredibly strong market share, you're a sort of a very strong, number two, but does that sort of change the way you're going to go about your business in Egypt?

Thanks Ed. First on the first part of the question, we as the transaction will be in the process of fully closing, we will only then be able to get in a deeper way into the business, however, from also - from our so far work and engagement that we have done on which we have based our decision.

We really see very, even though very challenging, competitive environment. However, we are very much encouraged with the potentiality of the business and already a number of both commercial as well as operational supply chain practices that the operation has.

Clearly, we see that we can bring lots of benefits from our scale expertise and accelerated funds into the market to enable them to grow and compete faster and to better extent. So, we primarily see the opportunities to stimulate and drive the top line.

However, of course, we will utilize every opportunity for productivity and efficiencies benefiting from Hellenic sourcing procurement, our vendor contracts. So we have recognized also, that part and I also want to emphasize one another point, which might, it was not easy to put immediate number on.

However, Egypt seen becoming part of the Hellenic group also makes it accessible, more in the talent exchange, benefiting from our talent development practices, which I strongly believe also can help the local team further where they already are. And then, second, part of the question was, please remind me?

Just as to whether it's slightly different game about your business, given the dominant market share?

Well, first of all, I have to give a local team in Egypt credit that they have been, as a system team been doing quite well, over the last couple of years, we've seen some really impressive initiatives and strategic choices. So the business is having a solid, good momentum.

And, yes, we have been already in some of our markets, in Europe, or in a more challenging competitive position, where we have the number two player, and then over the years overtaking and taking the leading position. And I really have the confidence that with the expertise, and fueling with additional investments, we will be able to do the same thing eventually in Egypt.

I really see it as a very healthy challenge for all of us. And I'm very excited about it.

Very good. And just a quick follow up perhaps for Ben, appreciate it's probably a little bit too early to talk about it because the 2022.

But could you perhaps just confirm sort of how far hedged you are on coke for next year at this stage.

Thank you. As you know, the commodity environment it's very volatile, the markets are choppy, we're looking for the right windows, when it comes to the second half of the year to go into 2022.

Their raw materials are critical ones we are further ahead. For example, in sugar, there, European sugar is probably about 25% to 30% already covered.

Other strategic materials like BT and aluminio are a bit lower, and we're looking for the right window to make sure that we're looking the right prices for 2022.

Thank you. Hi, Zoran, Ben, Joanna.

And couple for me as well. I wanted to just sort of pick up on where you left off, really with regards to the Egypt acquisition.

If you give us a bit more of a flavor of where we are in terms of per capita consumption, sort of trends generally in Egypt, how things have been evolving over time how the share of the business you've acquiring, has been evolving over time, you talked about the 5% compound volume growth that the business delivered over the last sort of decade. Is there any numbers that you can share with us to give us a bit more color?

That's my first question.

Thank you, Simon. So, in both cases, as we said both in NARTD as well as Sparkling Egypt team at the moment is on the second position, it has been sparkling where your share of 42% and that is a very good room for per capita improvement and with specific numbers our IR team and Joanna will be happy to come back to you so that I don't misquote wrong number.

Got it, okay, and then secondly, can I just go back to the sort of the reinvestment that's going back in the second half of the year? And can you give us a little bit more color as to where that will be going.

I mean, maybe regionally should be expected to be more skewed to established and developing. And I got sort of asked the question, because when I looked at the very strong performance we saw in EM from a margin delivery standpoint, through the first half of the year, it seems that it's really been driven by the operational leverage coming through the P&L.

Should we not expect to see sort of stepped down in margins in emerging markets, as a result of the cost reinvestment, it's going to be more coming elsewhere? Is that how I should think about it?

Yes, Simon. So first of all, all the old investments that we are doing in any case, but especially for the rest of the year, are in a very targeted focused way by country, it's not one size fits all.

However, first of all, you might remember that biggest chunk of our last year's savings were marketing spend. And this is where we are primarily accelerating.

Our initial plan between H1 and H2 has been such that in the second half of the year, we already planned higher investment, which we are now taking even further with savings that we had in the first half, because our intention, given the development of the year is not to pocket market investment, because we do see that investing back into the business is the right thing to do. So, out of this spend, that will be happening in the second half, more than 50% is on marketing investments, then we go into various parts of even though we are not resumed we even close to the activity or travel or anything like that.

However, we do start with certain necessary activities, also then versus last year, you have different types of incentive costs for the whole teams given the specifics of last year, however, in this year, there's going to be, we are having incentives on a normal as usual basis. So that is quite significant incremental costs.

So these are the primary areas of that where we will be investing. And I'll allow us now Ben to do and give you a little bit more flavor on the margin for the second part.

Yes. Thanks Zoran.

Again, when you look at the comparatives between half one and half two, then it all makes a lot of sense. If you think about H2 2020, generally extraordinary with EBITDA up 14%.

So clearly, we're always going to be facing a much more challenging comp in the second half of the year. And you can also probably remember that we say very favorably across environments in 2020.

And that we have always expected that to get tougher in 2021. So again, when you put the picture of what's happening on the commodity side of the business, added to what Zoran already mentioned, there are so far increasing investments in that second half, that's where how we get into the margin equation.

And we end up with our expectations of 20 to 30 basis points for the year.

That's really helpful. Can I just clarify one thing?

Particularly, I think from something you said earlier, Ben, with regards to input costs, I know you're not giving any guidance for 2022 at this stage, but did you say that you expected the rate of input cost inflation to be higher in 2022 than 2021? Or just the absolute level of input cost to be higher?

I think you said something to that order in response to Sanjeet's question earlier.

So basically, Simon, if you think about the input costs this year; we have low single digits in the first half. We expect a full year in high single digit that will imply that the second half is a double digit.

When we look at 2022, what we're saying is that the annual cost, input costs for 2022 the absolute certainty will be higher than in ' 21. That's what we see right now.

And that is the expectation for next year.

Good morning, Zoran, Ben. And thank you for the questions.

First to start with wondering could you - within the sort of 6.2% price/mix that you reported for the first half, I wonder can you breakdown what was the mix component and what was, say, specifically pricing? And just do you have any - is there any other sort of meaningful pricing actions or countries where you expect to take more pricing in the second half of the year?

And what should we sort of expect of that number broadly going into 2022?

Very well, let me get started with how to think about that 6.2% increase in NSR per unit case, and if you break that down between pricing mix you're going to see that pricing is slightly higher than half responsible for in the first half of the year. The year progresses, we should be seeing outweigh in pricing.

And I'll just add you've seen Fintan that we said that we've done pricing in over 90% of our overall market that was intentionally front loaded, seeing how the year will be and doing it almost across the board. All the planned pricing has been done.

However, we are continuously reading and identifying situation for every single country to see where we can and should do some more pricing. So, definitely as we see how a situation evolves.

And most, I would say that probably there will be even a bit more by the end of the year. However, at this point, I wouldn't put exact finger where and how much.

That's clear. And just as a left field as a follow-up question.

Could you give us any color on how the Topo Chico innovation has been going in the market where it's launched? And so I appreciate that in the U.S., PepsiCo and Bacardi Breezer sort of alcoholic meant new variants.

Are there any other brands or conversations happening with the Coca-Cola Company, maybe where you could consider expanding some of the non-alcoholic RTD brands into the alcoholic space?

Yes. Look.

So it's a really new start that we together with Coca Cola Company are doing. And we were very pleased to start immediately, as soon as Topo Chico was available.

We launched it eventually in a couple of different types of markets. Exactly as we together with Coca Cola Company team know that this is going to offer a good deal of learning for us, because it varied types of markets were already category is existence, two types of markets where it's not existed, and then it's developing.

So, we are literally still in the learning phase. But I can say that for example, from more developed market like the Republic of Ireland and Northern Ireland, Austria, we are really seeing some encouraging performance where already in those markets as well as Greece for example.

We are in Ireland, we are growing third player in Tesco. We are second player with almost 40% share in Greece.

We are second player in Austria. So we do see encouraging results, I need to remind that this is still - these are still low volumes.

However, we really see this as an important evolution of the portfolio expansion from which we learn a lot. And both Coca Cola Company and us are quite excited to embed those learning going forward.

And we are committed into developing this further.

Hi, good morning. My main question is again on pricing please, if you could give a bit of color by channel.

So in what channels are you able to put through the pricing and going forward? What channels do you expect to see more pricing?

Is it more convenience out of home? I asked this because in some of your markets, I imagine that you typically have sort of once per year negotiations, which I don't know whether this is the case in a lot of your markets in Eastern Europe.

But so the pricing so far has that largely been not in the grocery channel and that is still to come. And then the just a quick follow up after please, I was wondering whether you had a sales number or a broad sales number for Egypt that you could share with us, please.

Thank you, Andrea, good to hear. So on pricing, we've taken pricing I can say, across both types of both at home, as well as out of home.

And however, how it varies is by different packages, as well as different categories. We are really taking into account competitive play and situation in each if I can call it sub segment.

However, it happened across both segments of the market. In terms of also those customers where usually you need to discuss it and announce it earlier.

The teams have promptly done this on time last year. So I'm really pleased that the execution of the whole pricing schedule has been absolutely flawless.

And then the second part of the question was on -

It was on Egypt, if you could share if you have an Egypt sales number that you could share or a broad indication of the business's sales last year.

Yes, with the details we will come back at a later stage. But they are sales turnover for last year was just over €400 million.

Good morning. Sorry, just a quick follow up on price and mix.

Should we expect continued positive mix impact from sparkling and energy as you lap stronger comp? And how will you look to balance further pricing with affordability in your emerging regions?

And then a very quick check on the balance sheet. Would the Egypt deal preclude further balance sheet deployments in other deals or special dividends in the near term?

Thank you.

Thank you. So we do expect that there is going to be positive mixed impact from sparkling and energy, and clearly those are upon Hellenic priorities, where we are focusing and doing the joint initiatives together with Coca Cola Company team.

So in short, the answer is yes, that we do expect that with our strategic focus areas within sparkling and energy that this is going to give us the positive impact. Then I think you said also on the affordability options, we are absolutely we are doing a balance focus between premiumization as well as affordability in many markets, both of those have to be satisfied and have to be addressed.

Most obvious to mention, emerging markets, especially affordability is a key. And for that reason we are doing innovation in the pack sizes as well, which are addressing better some of the critical price points that are focused to address, more affordable levels.

And I can only say in conclusion that both of those of premiumization as well as affordability are our working wealth.

On the last - from the last question regarding the balance sheet. What we are expecting is that upon successful completion, we should be closing the year within our target range of 1.5x to 2x EBITDA, in terms of our leverage ratio, more towards the upper end, that still gives us a significant optionality and does not recruit for further transactions, so we find the right opportunities at the right time.

Good morning, Zoran and Ben. I've got three questions, please.

The first one is on Russia where again, another quarter of very strong growth led on to the team there. I was wondering if you could remind us what are you doing differently in Russia at the moment and how sustainable is this growth.

And maybe some early signs that you're seeing as we move into Q3. So thanks.

Hi, Charlie. Yes.

So in short, Russia is really doing well. Let me just say, first of all, externally and market wise, we see that the industry, both the whole NARTD as well as sparkling, et cetera, there is a good growth in the market, both in volume as well as in a value.

So we are part of let's say, a very fertile playfield. That is happening.

Secondly, we also see that certain consumer sentiment and confidence in the country has been on a very good level, especially in the best place over the last five years that plays a role. Thirdly, also the fact that Russians to great extent, have stayed in the country for their vacations.

And fourthly, also we need to call out that we can't complain about weather in Russia. Actually, it's been quite good.

So all that has given tailwind from which we benefit. Now, this also, the reason that we are also having these sustained performances is also the fact that some of our big bets in the country are working very well.

Russia is one of our exemplary examples of the revenue growth management initiatives, let's say in the packages, where we have done exactly what I said in my previous answer, where we have done, let's say, example downsizing one liter to 0.9, which is performing extremely well driving share, example of premiumization where intentionally over the last two years, the team has done really conscious 360 approach to Schweppes as we recognize that adult sparkling is a huge opportunity in Russia. And the fact that last year as well as this year we are having that level of growth.

On Schweppes, which has higher revenue per liter, then the rest of the sparkling portfolio is a good example of how we are driving a profitable revenue growth. Also Russia is benefiting from the fact that our Big Data and advanced analytics next to Nigeria, Russia is the - those are the top two markets where we are front loading with capability investment.

So Big Data advanced analytics has served how we are taking segmented execution in the country, to the next level. And let me close also with the fact that Russia is one of our leading countries in how they are taking - how they are digitizing with our b2b platform, where last year, they were on 1% of orders down through the platform, and they are now just over 25% of all orders in the country being done through the platform, which then enables our teams on the ground to more focus on account development, new initiatives, et cetera.

So honestly, Charlie, I could talk much more on Russia for call. But let me know if this helps.

Thank you. That's great color.

My second one was on maybe we could talk a bit about some of the category and in particular, Sprite and Fanta, which have been, fairly lackluster for a few quarters that had a very strong past could you maybe talk about what you're doing differently there and how sustainable that is.

Yes, this comes as a result of intentional work coming from Coca Cola Company and our teams to really embed hard learnings from last year and the year before. I have to also give a credit that in the new emerging stronger reorganization that Coca Cola Company has done.

They have split the team's global teams between Coca Cola trademark team and flavors team and evidently there is more oxygen in the teams to focus more and that has produced some very good results, great campaign. This is coupled also with the fact that we are accelerating reformulation where we are introducing low and no sugar variants which are performing really well in the markets as well as, innovation of the flavors.

And I have to say that the same thing to preempt the question that I just said for Fanta, I'm very pleased at the same thing I can say also for Sprite. And both of those are performing really well.

And I'm confident that they will give us more growth going forward.

Perfect. Thank you.

And so just last one to squeeze in for Ben. The working capital profile this half was quite different than normal with a big inflow and trade payables.

I was just wondering if you talk a bit more about that, and then how you think that will shape up for the rest of the year? Thank you.

Yes, so on working capital, we have been doing a lot of work, taking the learnings that we took in 2022, in the management of receivables, for example, and extending it into 2021. So we're seeing a very good performance coming through in working capital.

All I can say is that these will continue to be an area of focus, as we enter the second half, we'll have some headwinds in working capital as well. You may remember that during Q4 last year, we receive a benefit from payments from customers, we disclose, and essentially we're going to be analyzed to use that.

But so far, so good, both in terms of the receivables, inventories and payables as well. I'm very encouraged by the conversion cycle in day that is improving this year versus prior year.

Good morning. This is Mandeep Sangha on behalf of Laurence.

Thank you very much for taking our question. My first one just relates to the reopening of the at-home channel.

Obviously, that's clearly accelerated in the second quarter. Do you have a feel of where sort of inventory levels are in the - sorry, out-of-home channel, sorry, where inventory levels are in the out-of-home channel?

And do you expect that as being sort of restocking and may have pulled forward demand from free Q2?

Yes, hi, Mandeep. Look, inventories have been on a very low level.

That was one of the learning last year that we worked very closely with our customers to help them keep as low inventory as possible, given the circumstances. And then as they reopen, that we are very far in how we support them with providing them with a product they need.

So that's part of what we say how we support the reopening, not burdening them with excessive inventory, but being really agile in working closer with them. So that also we help them in how they work with our own working capital.

Great. Thank you.

And just a follow-on question. Obviously, in terms of the Poland, you took high pricing in Q1, and that sort of led to low '20 volume decline.

It looks like that seemed to have stabilized in 2Q. Do you - are you still confident of sort of mid-single-digit volume declines on the full year?

Or do you think maybe underlying trends are a bit stronger? And maybe you could outperform that mid single digit decline?

Yes. So absolutely, first of all, that performance in Q2 was really encouraging overall, between the quarters.

It's fully in line with our expectations. On a full year level, yes, I would say that this would be around mid-single digits, maybe slightly a bit more negative.

But that's pretty much in line how we expect that year one, following this tectonic price increase that we had to do because of the tax is evolving. But I'm really also pleased about the fact that we are gaining share in the country that proves that given the new set of circumstances, that activities and measures that the team has done were spot on.

And particularly, we are really encouraged how the impact of those has been visible in Q2. And I believe that we will see those kind of in line and positive signs for the rest of the year.

Hello, many thanks for your time. Just wanted to come back to Egypt; I was wondering if you could give us a bit color on the balance sheet of the company?

How much net debt or net cash are you taking over during - with the transaction? That's my first question.

I have another one.

Hi, Osman. At this stage, I would only refer to the number that we provided in the press release, which is the total assets number, which I think was 5.2 billion Egyptian Pounds.

And thank you for the understanding that we will give you more details and color as we progress towards the closing of the deal.

That's fine. Let me ask you my second question if I can, regarding market share dynamics, you've done another strong quarter have and gained share.

Where are the gains coming from? Is it mainly your main competitor in most of the geographies?

Or are you seeing some different trends? Maybe gains from smaller competitors?

Yes, indeed. So first of all, yes, I'm really encouraged with the share performance and also how it evolved also further in Q2, with depending on the country; this is coming in certain in several countries, either from our competitor key competitor, Pepsi, or in some other countries, these from the local competition.

But, it's not only one of those; it really depends on the market.

Okay. And maybe if I could squeeze in, I mean, you did talk about Russia, earlier in the call, but in the near term, there was a bit of a virus spike, has that now normalized?

I see it has kind of in the Google data. But on the ground, how are you seeing near term performance in Russia?

Yes, it's still not finished, definitely. However, we think that the country overall has started resolving it in a more accelerated way.

Vaccination is improving, and definitely, within our organization, we are pleased, also with quite accelerated vaccination rates that have been achieved. And I'm really proud of that.

So however, with those measures that was in place, our teams have adjusted and supported customers. But I would say that while measures are not still out or lifted, however, we have adjusted and, and that is enabling the performance.

Thank you. Thank you for the time today and for the patience with our technical disruption.

I just wanted to highlight that we are very pleased by this performance and our progress on our strategy. We continue to build on our strengths and I am confident our portfolio, market execution focus, our customer relationships, our people and our partnerships with the Coca-Cola Company and beyond ensure that we will continue to capture the recovery.

We are also very excited with this opportunity to expand our footprint in Africa bringing 100 million more consumers into the population we serve, and we look forward to updating you on this soon. Let me extend my good wishes to you and your families, and all of us at Coca-Cola HBC sincerely hope you stay safe and well.

We look forward to speaking to you all again soon. Thank you.