May 15, 2018 / 2:32 PM / in a year

Czech cola maker Kofola seeks acquisitions, or exit, in Poland

PRAGUE, May 15 (Reuters) - Czech soft drinks maker Kofola Ceskoslovensko is ready to quit the tough Polish market unless it can find an acquisition in the coming months to expand its portfolio, the company said on Tuesday.

The group is 68 percent controlled by the Greek-Czech Samaras family who resurrected the communist-era cola brand Kofola in the 1990s and has since expanded around central Europe with juices, water and other drinks.

But it has had trouble making progress in Poland, a soft drinks market worth more than 5 billion euros ($5.9 billion), according to a KPMG study.

Kofola’s sales in Poland fell by 26 percent to 1.3 billion crowns ($60.2 million) in 2017 — accounting for 17 percent of group revenue.

“Our brands are not sufficient for building a strong position on the demanding Polish market,” Kofola said in its first-quarter earnings report released on Tuesday.

In the last year, Kofola has cut staff and concentrated production at one plant in Poland while also striking a distribution deal for Nestle’s Nestea.

While it said it was focussing on acquisitions, it also is looking at plans to put its Polish unit HOOP Polska up for sale in a possible tender.

“We still believe the Polish market is very interesting for Kofola... We are focusing on acquisitions,” Chief Financial Officer Daniel Burys said. “Probably we will start with activities on this divestment option in the next month.”

On a conference call, company executives said a potential divestment could negatively impact its dividend next year depending on the valuation of the Polish business.

But any sales was likely not to impact core earnings before interest, tax, depreciation and amortisation (EBITDA), Burys said, as the Polish unit was loss-making last year.

He reiterated Kofola’s outlook for EBITDA to exceed 1 billion crowns in 2018.

In the coming months, Kofola is also likely to lift its free float, with the second biggest shareholder - CED Group, which is a subsidiary of private equity group Enterprise Investors - aiming for a private placement. ($1 = 21.5890 Czech crowns) ($1 = 0.8445 euros) (Reporting by Jason Hovet Editing by Keith Weir)

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