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BGC Partners: CCOLA 1Q19 Earnings Review: Better

Coca-Cola Icecek (CCI) posted a net loss of TL3mn (vs. TL49mn net loss in 1Q18) in 1Q19, better than market consensus of TL14mn loss and our expectation of TL85mn loss. EBITDA came in at TL331mn (+17% YoY) in 1Q19, better than consensus (TL306mn) and our expectation (TL257mn). Main deviations from our expectations were: i) higher than expected unit prices driven by mix improvement in Turkey, ii) lower than expected opex on a consolidated basis, iii) TL10mn positive EBITDA impact of IFRS16 which we were not taking into account and iv) lower than expected net financial expenses, leading to a positive surprise on both EBITDA and net income levels. Consolidated EBITDA grew by 17% YoY thanks to 37% growth in Turkey EBITDA supported by improved product mix as sparkling category posted stronger growth in 1Q19 and effective hedging on FX-based raw material costs. EBITDA margin deteriorated by 60bps parallel to higher opex driven by inflation impact, low volumes in international operations mainly stemming from weak demand in Pakistan. We expect the earnings announcement to have a positive impact on the stock.