Statements by Coca-Cola HBC management on Russia have taken on new significance following reports that local company Bochkari is seeking to have Multon and Multon Partners placed under temporary external administration.
The development has brought into focus not only the group’s exposure to the Russian market, but also the substantial cash balances accumulated in the country.
The issue had been raised repeatedly by analysts on recent Coca-Cola HBC conference calls. On 5 August, during the first-half results presentation, Matthew Ford of BNP Paribas Exane asked for an update on sales volumes in Russia and on cash balances, which had exceeded €1bn.
“The situation and performance in Russia are continuing as they have in previous years. Nothing different. We see that this business, which is managed and funded locally, is performing as we have just announced in the press release. So there are no major changes in what is happening there,” chief executive Zoran Bogdanovic (pictured) replied, explaining that the business continued to operate with local management and local funding.
On the same call, chief financial officer Anastasis Stamoulis confirmed that cash balances in Russia exceeded €1bn. Around 85% was held in roubles, while part of the increase was linked to exchange-rate movements. The CFO also clarified that the funds generated financial income.
Geopolitical risk returned to the discussion on 9 September, when Bogdanovic took part in the Barclays conference. The head of Coca-Cola HBC described how local management teams prepared different scenarios to deal with unexpected developments, but offered no specific assessment of the consequences of a potential loss of control in Russia.
“Covid changed many things about the way we conduct scenario simulations and manage risk, which, again, is based on assessing various scenarios. But before that, Nigeria was our training ground. We went through all sorts of situations there and dealt with political, macroeconomic and fiscal issues, as well as supplier issues. All kinds of situations tested us there, and we drew lessons that proved really useful in various scenarios in other geographies,” he said.
On 18 September, Euro2day.gr sent a series of questions to Coca-Cola HBC’s investor relations and communications teams, following the intervention by Russian authorities in the operations of other foreign groups.
The questions concerned the possibility of a change in Multon’s ownership, any communication with the Russian authorities, Russia’s share of the group’s revenue and operating profit, and the book value of the relevant assets.
Euro2day.gr also asked whether there was a contingency plan in the event of temporary administration being imposed, a loss of control or a forced transfer of the business, and what the potential financial impact on the group might be.
“We have not been informed”
Following the latest developments, the company issued a statement making clear that it had received no information from the Russian government about its operations in the country. It added that it does not rely on them to fund its operations outside Russia.
In full:
“Coca-Cola HBC AG (“Coca-Cola HBC” or the “Group”) notes recent media reports and scenarios concerning its operations in Russia.
Coca-Cola HBC has received no information from the Russian government about changes to its operations in Russia, which have operated locally as a standalone business unit since 2022.
Coca-Cola HBC does not rely on revenue or funds from its Russian business operations to fund the Group’s activities outside Russia or to service its debt obligations.
Coca-Cola HBC will provide further updates if deemed appropriate.”