Coca-Cola Hellenic Bottling Company, the strategic bottling partner of the Coca-Cola Company, has agreed to buy a majority stake in the Coca-Cola Bottling Company of Egypt S.A.E., for $427 million after the Swiss-based soft drink bottler reported an increase in half-year profit.
Coca-Cola HBC announced that a unit of the company has reached agreement to acquire approximately 94.7% of the Egyptian company from its major shareholders including subsidiaries, The Coca-Cola Company and MAC Beverages Limited.
The deal, which will allow Coca-Cola HBC to expand into its largest market in Nigeria and grow in Egypt, was announced shortly after the company reported a 68% increase in similar operating profit to €350.3 million for the six months ending July 2.
The company, which bottles and sells the beverages of the Coca-Cola Company exclusively in 28 countries, warned that operating profit margins will be lower in the second half than in the previous year due to higher cost inflation.
However, the company expects margins to expand by 20-30 basis points in 2021, thanks to the strength in the first half, as revenue is expected to recover with an increase in volume of food and drink as restrictions are lifted.
Coca-Cola HBC CEO Zoran Bogdanovic says, “High raw material costs are expected to continue until 2022.” Analysts at Jefferies Group added, ”With input cost inflation rising, we struggle to see upside risks to our agreed margin forecasts in FY 2022.”
A combination of factors, including disruptions in global supply chains and rising demand, have driven up raw material prices, forcing packaged food companies such as PepsiCo, Inc. and rival the Coca-Cola Company to pass on costs to consumers.
Coca-Cola HBC said it expects the Egyptian deal to add to profits in the near term.