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Coca-Cola HBC should fizz higher on reopening
COCA-COLA HBC (CCH) 25.09
Gain to date: 7.3%
Original entry point: Buy at £23.38, 17 December 2020
OUR ‘buy’ call on soft drinks colossus Coca-Cola HBC (CCH) has marginally underperformed the wider market year-to-date despite achieving solid gains but we are confident there is more upside to come as earnings fizz higher with the reopening of the global economy.
We are encouraged by a first quarter trading update (12 May) from the soft drinks bottler, a strategic partner of The Coca-Cola Company with access to strong brands, leading market shares and a geographically diversified distribution footprint.
Despite Covid-19 related restrictions continuing to impact the important out-of-home channel, Coca-Cola HBC reported a good start to the year with 6.1% like-for-like sales growth led by the sparkling and energy categories and ‘strong execution’ in the at-home channel.
Lockdowns in Europe continued to stir up headwinds, yet Coca-Cola HBC’s geographic diversity enabled it to benefit from accelerating sales in emerging markets, with both Russia and Nigeria seeing double-digit volume growth in the quarter.
CEO Zoran Bogdanovic insists strong customer relationships mean it is well placed to capitalise on the reopening of the out-of-home channel.
‘The speed and shape of recovery from the pandemic remains uncertain,’ explained Bogdanovic, ‘but Q1 puts us on track to achieve our 2021 guidance.’
SHARES SAYS: Keep buying Coca-Cola HBC.