Annual growth in Czech consumer prices accelerated from 1.8% to 2.4% in May. This was significantly higher than both the market consensus (2.0% yoy) and our own estimate (1.9% yoy). While annual inflation was 0.2pp below the CNB forecast in April, it was 0.1pp above the central bank’s expectations in May.

Annual growth in Czech consumer prices accelerated from 1.8% to 2.4% in May. This was significantly higher than both the market consensus (2.0% yoy) and our own estimate (1.9% yoy). While annual inflation was 0.2pp below the CNB forecast in April, it was 0.1pp above the central bank’s expectations in May.

Food prices rose significantly. Prices of food and non-alcoholic beverages increased by 1.3% mom in May, while prices of alcoholic beverages and tobacco rose by 1.6% mom. Prices in both categories had fallen in April, possibly due to Easter discounts. The strong increase in May contributed to an acceleration in annual terms. Price growth for food and non-alcoholic beverages accelerated from 4.1% to 5.4% yoy and for alcoholic beverages and tobacco from 2.0% to 3.7% yoy. The surprisingly strong increase in food prices accounted for around half of the difference between May’s annual inflation and our forecast.

Both regulated prices and core inflation were also higher than we expected. Although regulated prices increased by 0.5% mom in May, their annual growth remained subdued at 0.8%. Meanwhile, core inflation accelerated from 2.6% yoy in April to 2.8% yoy in May, which was slightly above the CNB forecast of 2.7% yoy. A further increase in imputed rents contributed significantly, with growth rising from 0.4% to 0.8% mom and from 4.1% to 4.6% yoy. This was likely driven by continued rapid house price growth due to a strong recovery in demand for real estate amid limited supply. This was also reflected in an acceleration in services inflation from 4.7% to 4.9% yoy, while goods inflation remained weak in May (+0.9% yoy).

In contrast, fuel prices remained on a sharp downward trend. They fell by 1.9% mom, marking the third consecutive decline. Compared to May last year, fuel prices were 13.5% lower. This was driven by lower oil prices and a stronger koruna against the US dollar.

Although the latest data reduces the likelihood of further CNB rate cuts in the coming months, we believe that the outlook for inflation remains favourable. Our forecast incorporates 25bp cuts at the August and November CNB meetings, which would bring the key repo rate to 3% by the end of the year. While we still consider a repo rate of 3% by the end of the year to be realistic, there is a risk that the remaining two interest rate cuts may be delayed due to sluggish core inflation. This mainly applies to the August cut. We expect inflation to average 2.2% this year and fall to 1.8% next year. The impact of tight monetary policy, lower energy and fuel prices, as well as the negative effects of the economic slowdown resulting from the introduction of US tariffs should gradually dampen consumer price growth.

Kofola had a weak start to 2025 in the first quarter. Its EBITDA was down 37% yoy. These weak figures are due to the introduction of a sugar tax in Slovakia and significant pre-stocking. Marketing costs were also higher. Colder weather did not help, either. Despite these results, which represent only 8.3% of the full-year EBITDA projection, Kofola reiterated its full-year targets.

Kofola had a weak start to 2025 in the first quarter. Its EBITDA was down 37% yoy. These weak figures are due to the introduction of a sugar tax in Slovakia and significant pre-stocking. Marketing costs were also higher. Colder weather did not help, either. Despite these results, which represent only 8.3% of the full-year EBITDA projection, Kofola reiterated its full-year targets.

Kofola's total sales for the first quarter of 2025 reached CZK2.1bn, practically the same level as last year. However, Kofola's beverage business declined, primarily due to the sugar tax in Slovakia that took effect this year, as well as cold weather conditions. Consequently, sales volumes fell (-9.3% yoy) in virtually all beverage categories. This decline is also related to the decrease in sales in this sector. The decline was offset by the beer segment, which was not part of Kofola in the first quarter of 2024. However, the results were weaker yoy here too. The Fresh&Herbs segment performed better. Both Leros and the UGO salad bar chain grew. Costs for sweeteners and packaging decreased, while energy costs increased slightly. Marketing costs related to rebranding increased significantly. Kofola reported an EBITDA of CZK162.7m, a 37% decrease yoy. Financial costs and the tax burden were both lower yoy. Net profit for the first quarter of 2025 was CZK-80.8m (CZK-21.8m in the first quarter of 2024).  

Leverage (net debt/EBITDA) increased from 2.14x at the end of 2024 to 2.61x. This increase is due to the decline in EBITDA and cash resulting from acquisitions and investment costs.

2025 guidance: EBITDA for the first quarter of 2025 is only 8.3% of the full-year target. Nevertheless, Kofola has reiterated its targets. The first quarter is seasonally the weakest, and the second and third quarters are decisive for full-year results. Full-year EBITDA was expected to be in the range of CZK1.9-2.0bn (+4.6% yoy) with revenue growth of +3% yoy. Debt is expected to remain at 2.1x, and CAPEX is expected to be up to 60% of full-year EBITDA.

Kofola announced that its sales fell 7% yoy in April, with a similar decline in volume. Unfavourable weather was among the reasons cited.