The share price of Coca-Cola HBC (LSE: CCH) dropped 2% to 1,557p during early trading this morning, despite the company’s profit increasing for the first time in three years, as cost cutting offset weakened demand for its drinks products.
Profits rose 3% to £240m. Over the previous 12 months the Coca-Cola HBC’s share price has declined 9%.
The group, which bottles and distributes Coca-Cola in 28 countries, mostly in Europe, saw volumes return to growth in October, November and December, primarily supported by emerging markets like Russia and Nigeria.
For the whole year, however, trading conditions — made difficult by factors such as stretched household incomes and high unemployment — were not conducive to volume expansion, and the year ended with a 1% volume decline overall.
The group continues to generate strong free cash flow, generating £56m in Q4. For the full year cash flow increased by 21% to £339m. Between 1 January 2013 and 31 December 2015 the firm estimates it will generate free cash flow of around £1.1bn.
The chief executive, Dimitri Lois, commented:
“We remain confident in our ability to continue to drive operational performance and deliver on our strategic commitments: winning in the marketplace, growing currency neutral net sales revenue per case, focusing on cost leadership through tight operating expense control and generating solid free cash flow, enabling us to invest in sustainable growth and create long-term shareholder value.”
Today’s results statement revealed earnings equivalent to 64p per share, and a dividend equivalent to 29p per share.
After this morning’s price movement the shares may therefore trade on a P/E of 24 and offer a potential income of a little under 2%.
The decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the drinks sector — is, of course, entirely your decision.