Coca-Cola Icecek (CCI) announced its 9M08 results with a net profit of YTL184mn in
9M08, up by 11% YoY, slightly eclipsing our estimate of YTL178mn. Sales volumes notched
up 10% YoY growth to reach 428mn unit cases in 9M08 while net sales were up by 17% at
YTL1,828mn, generating YTL345mn in EBITDA. CCI’s net sales and EBITDA figures were in
line with our estimates; in the challenging economic environment, we believe CCI’s third quarter
results can be considered positive. We maintain our Market Perform recommendation for the
stock.
Sales Volume
Consolidated: Consolidated unit case volumes increased by 9% to 186mn in 3Q08; unit case
volume increased by 10% YoY in 9M08, versus prior year both in the Turkey and International
operations, to reach 428mn cases. The share of operations in Turkey in total volume stood at
80% during this period, with international operations, excluding Pakistan, accounting for the
remaining 20%.
Turkey: Unit case volume in Turkey increased by 10% to 343mn in 9M08; the launch of CocaCola zero, expansion product portfolios and increased penetration of HOD water contributed to
the solid volume growth in Turkey. Doğadan handed over the sales & distribution of tea to CocaCola Satış ve Dağıtım A.Ş. (“CCSD”), a fully owned subsidiary of CCI, from September 1, 2008;
as a result, Q3 volume was underpinned by an additional 2mn unit cases from Doğadan.
International: Unit case volume increased by 10% YoY to 86mn cases in 9M08. Strong growth in
the Middle East markets continued, although growth in the Central Asia Region remained rather
weak in 3Q08, which can be attributable to the continued economic slowdown, mainly in
Kazakhstan.
Sales
Consolidated: Net sales increased by 15% YoY to YTL772mn in 3Q08, and by 17% YoY to
YTL1,828mn in 9M08. The fact that net sales revenues staged a stronger recovery than sales
volumes was down to price increases and changes in the package mix.
Turkey: Net sales were up by 19% YoY in 9M08 to reach YTL1,537mn. Net sales revenues grew
at a stronger pace than the growth in volumes, thanks to the favourable impact of price
increases and effective discount management. Price hikes in the nine month period amounted to
around 7.5% in Turkey, slightly higher than the 6.8% rate of inflation.
International: Net sales increased by 20% YoY in 9M08 to YTL294mn; average prices per unit
case increased by 9.4% YoY during the same period, as a result of the better package mix and
rise in average prices.
EBIT
Consolidated: In 3Q08, EBIT edged up by 2% YoY to YTL136mn. In 9M08, EBIT increased by
8% YoY to YTL265mn, with the EBIT margin narrowing by 1.2pp to 14.5% in 9M08 due to higher
operating expenses. The increase in operating expenses was mainly due to higher marketing
and distribution expenses in Turkey and higher personnel and distribution expenses in
international markets.
Turkey: EBIT increased by 19% YoY in 9M08 to YTL238mn; in 9M08, the EBIT margin remained
flat at 15.5%. The increase in operational expenses was mainly a result of increases in
distribution and marketing expenses. Distribution expenses increased due to rising volumes and
gasoline prices. Marketing expenses increased as a result of the launch of Coca-Cola zero, the
Euro 2008 tournament and Ramadan promotions.
International: EBIT in international operations dropped to YTL32mn in 9M08, hit by a 31.8% YoY
increase in overall operating expenses, mainly due to higher personnel and distribution
expenses. Furthermore, Syria was not part of a pro-rata consolidation until the end of April 2007,
and both Syrian and Iraqi operations were at the start-up phase in 2007, whereby expense
bases in 2007 were lower.
EBITDA
Consolidated: In 9M08, EBITDA increased by 2% YoY to YTL345mn. In 9M08 EBITDA margin
decreased to 18.9%
Turkey: In 9M08 EBITDA increased by 18% to YTL306mn; exceeding the full year 2007 EBITDA
of YTL284mn. The EBITDA margin decreased by 2.7pp to 19.9% in 9M08, 20bps lower than its
2007 level.
International: EBITDA increased by 5% YoY to YTL48mn in 9M08, with the EBITDA margin
narrowing by 230 bps to 16.4% in 9M08.
Net Debt
CCI’s consolidated net debt increased from YTL671mn to YTL674mn during the third quarter.
Some 58% of the Company’s debt matures in 2010; the amounts due in 2009 are all in
International operations.
Summary Financials
% Change
(mn YTL)
3Q07
4Q07
1Q08
2Q08
3Q08
9M07
9M08 3Q08/3Q07 9M08/9M07
Net Sales
673
361
391
664
772
1,564
1,828
15%
17%
Gross Profit
283
135
161
285
318
649
764
12%
18%
Operating Profit
133
-3
29
101
136
245
265
2%
8%
EBITDA
175
-28
59
134
152
338
345
-13%
2%
Financial Exp./Inc. (net)
0
-2
-45
9
-3
-16
-39
n.m.
n.m.
102
-13
-18
95
107
166
184
5%
11%
Cash and Near Cash
184
148
205
113
184
184
184
Total Financial Debt
557
508
753
783
858
557
858
-674
Net Income
Net Cash
-373
-360
-549
-671
-674
-373
Working Capital
346
221
339
491
459
346
459
Shareholders Equity
934
911
943
980
1,091
934
1,091
Gross Margin
42.1%
37.4%
41.1%
43.0%
41.1%
41.5%
41.8%
-0.9 pp
0.3 pp
Operating Margin
19.8%
n.m.
7.4%
15.1%
17.5%
15.7%
14.5%
-2.2 pp
-1.2 pp
EBITDA Margin
26.0%
n.m.
15.1%
20.1%
19.7%
21.6%
18.9%
-6.3 pp
-2.7 pp
Net Profit Margin
15.2%
n.m.
n.m.
14.3%
13.9%
10.9%
10.2%
-1.3 pp
-0.7 pp
Ratios
Best Regards,
Garanti Securities Research
www.garantisecurities.com
This information in this report has been obtained by Garanti Securities Research Department from sources believed to
be reliable. However, Garanti Securities cannot guarantee the accuracy, adequacy, or completeness of such
information, and cannot be responsible for the results of investment decisions made on account of this report. This
document is not a solicitation to buy or sell any of the securities mentioned. All opinions and estimates included in this
report constitute our judgment as of this date and are subject to change without notice. This report is to be distributed
to professional emerging markets investors only.