Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2028 bonds, CZK4.0bn of 2032 bonds and CZK2.0bn of 2036 bonds. There are three auctions left this year, including tomorrow’s, which is one of the largest in terms of issuance volume this year. The December calendar shows a total of CZK18.0bn to be issued after CZK20.5bn planned for November. Since the beginning of the year, however, MinFin has sold a third more than indicated in the calendars.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2028 bonds, CZK4.0bn of 2032 bonds and CZK2.0bn of 2036 bonds. There are three auctions left this year, including tomorrow’s, which is one of the largest in terms of issuance volume this year. The December calendar shows a total of CZK18.0bn to be issued after CZK20.5bn planned for November. Since the beginning of the year, however, MinFin has sold a third more than indicated in the calendars.

Market situation: Since the last auction (27 Nov), CZGB yields have declined slightly, following core trends, while CZGB Bund and ASW spreads have widened further. On the data front, Czech GDP growth in 3Q24 was revised up 0.1pp to 0.4% qoq in the second reading, with a solid rebound in household consumption adding 0.7% qoq (report here: https://bit.ly/GDP_3Q24_EN). The state budget posted a deficit of CZK259.2bn ytd in November. The approved full-year deficit of CZK282.0bn is thus achievable. Wage growth for 3Q24 will be published tomorrow. Our estimate of 6.8% yoy growth in average nominal wages would be a pro-inflationary surprise versus the CNB's November forecast of 6.1% yoy growth, which could underpin the CNB’s hawkish bias and increase the possibility of a December pause.

Rates outlook: We expect the CNB to cut interest rates by 25bp at each monetary policy meeting until May next year, when the repo rate should reach its terminal level of 3%. However, given the hawkish bias of the central bank’s board, the risks to our CNB rate forecast are skewed to the upside.

As expected, the third quarter was the best-performing in Kofola's history. EBITDA grew +33% yoy to CZK737m on sales of CZK3.4bn (+33% yoy). In addition to strong organic growth supported by good weather, the figures were also boosted by the acquisition of the brewery group. Input prices declined as expected. 3Q24 results beat the net profit consensus by +6.3%. Kofola estimates full-year EBITDA at the high end of the original guidance. In addition, it lowered its leverage target and raised its dividend guidance, with a new expectation of at least CZK13.50.

As expected, the third quarter was the best-performing in Kofola's history. EBITDA grew +33% yoy to CZK737m on sales of CZK3.4bn (+33% yoy). In addition to strong organic growth supported by good weather, the figures were also boosted by the acquisition of the brewery group. Input prices declined as expected. 3Q24 results beat the net profit consensus by +6.3%. Kofola estimates full-year EBITDA at the high end of the original guidance. In addition, it lowered its leverage target and raised its dividend guidance, with a new expectation of at least CZK13.50.

3Q24 sales increased by +33% yoy to CZK3.4bn. Volumes grew as performance was supported by favorable weather conditions and, of course, the consolidation of acquired breweries. We estimate organic growth at a high +14% yoy. The decline in input costs for sweeteners and packaging was positive. The increase in operating expenses (sales, marketing, distribution and administration) is related to the acquisition of breweries. EBITDA grew +33% yoy to CZK737m in 3Q24. The margin is stable yoy. Former Czechoslovakia is the main pillar with a 59% share, followed by the Adriatic region with 21%. Breweries contributed 16% and Fresh&Herbs 4%. Net profit increased +55% yoy to CZK380m. This is +6.3% ahead of market estimates.

Leverage (net debt/EBITDA) decreased to 2.15x from 2.39x in 1H24 (2.28x at the end of 2023). This is well below the new lower full-year leverage target of 2.5x.

The September floods, which particularly affected the main production plant in Krnov, are expected to cause damages of approximately CZK250-300m. Most of the damage will be covered by insurance. It is estimated that the flood will have a negative impact on profit in the range of CZK25-35m. This represents 3.9% of our full-year net profit forecast. All of Kofola's operations are now running without restrictions.

Guidance: Kofola is expected to achieve full-year EBITDA of CZK1.8bn, at the upper end of the original guidance range of CZK1.55-1.80 bn. Revenues are expected to grow +25% yoy. Ytd EBITDA is 89% of the full-year target. The third quarter is Kofola's seasonally strongest and therefore the most important for the full-year result. The new leverage forecast is up to 2.5x, down from 3.0x. The dividend forecast has also been updated and is now expected to be at or above CZK13.50. Note that Kofola paid an advance dividend of CZK 7.50 in October. In our estimates, we assume a dividend of CZK19.10 for 2024. This means that Kofola should pay a final dividend of CZK11.60 next year. According to our estimates, Kofola will exceed its full-year targets.