Broker snap: Coca-Cola HBC still lacking fizz, says Credit Suisse

22nd Oct 2013 11:02

Credit Suisse has retained its 'neutral' stance on Coke bottling firm Coca-Cola HBC (CCH) ahead of its third-quarter results next month, saying that the company is 'still lacking its fizz'.The bank said that it expects volumes to have remained weak in the three months to September 30th and has cut its full-year estimates by 6%. The results for the third quarter are due out on November 7th."Volumes in CCH's markets suffered badly post the financial crisis and have yet to recover. There has been no growth for five years now. Full-year volumes this year look set to be down again after what we expect to be a soft Q3."Credit Suisse explained that lower volumes continues to put pressure on margins which should be little changed this year despite attempts at cost saving. While sugar costs in the EU are estimated to be lower next year, the bank said that CCH "has shown it (and Coke) would rather invest in growth than margin, and it is only when volume growth returns that margins can recover as well"."Gross domestic product has proved a good proxy for volume growth in these markets, and expectations/forecasts have been falling."Margins are nearly half of what they were five years ago and a return to peak figures would see pro-forma 2013 earnings per share of €1.44, some 80% higher than the bank's current estimate. This recovery, however, will only happen alongside volume growth, it warned.The bank pointed out that CCH trades at 21.5 times 2014 estimated earnings - "a premium to all staples and other bottlers (albeit on depressed earnings)". "There will come a time to play the recovery in its markets, but it is not yet we suggest."The target price was maintained at 1,790p. The stock was down 0.51% at 1,755p by 11:08 on Tuesday.BC