The Swiss-based soft drinks bottler Coca Cola HBC has agreed to invest to take over a majority stake in Coca-Cola Bottling Company of Egypt in a deal worth $427 million.
Coca Cola HBC earlier reported a large growth in its profits for the first half of the year,
The investment will be made through a unit of HBC and the deal will result in Coca Cola HBC owning about 94.7 per cent of the Egyptian company. Coca Cola HBC said that the stocks will be bought from the major shareholders of the Egyptian company which includes affiliates of The Coca-Cola Co and MAC Beverages.
Following this deal, Coca Cola HBC will be able to further expand its largest market Nigeria in Africa, while also growing in Egypt. This deal was announced by the Swiss-based soft drinks bottler shortly after reporting an almost 68 per cent growth in its comparable operating profit, at 350.3 million euros, for the six months ended July 2.
Coca Cola HBC bottles and sells Coca-Cola Co drinks in 28 countries around the world and the United States based Coca-Cola owns 23.16 per cent of it. During the results announcement, the company however warned that rising cost inflation will result in its operating profit margins being lower in the second half compared with a year earlier period.
Despite this, the company is expecting the profit margins to be between 20 and 30 basis points for the entire of 2021, primarily because of the strong performance in the first half of the current year. The company also expects a recovery in its revenues as people are expected to eat and drink out more with the lifting of pandemic induced restrictions the world over.
The company expects the higher raw material costs to drag into 2022 as well, said Coca Cola HBC CEO Zoran Bogdanovic.
“Given rising input cost inflation, we struggle to see upside risk to consensus margin expectations in FY22,” said analysts at Jefferies.
Raw material prices have been pushed up in recent months because of a host of factors that include disruptions in global supply chains and rising demand. That has forced packaged food companies such as PepsiCo and rival Coca-Cola Co to pass on the higher costs to consumers.
HBC said it expects the Egypt deal to add to earnings in the near term.
(Adapted from Reuters.com)