Czech inflation fell to 2.8% yoy in January from 3.0% yoy in December. This is in line with the CZSO’s preliminary estimate. Like us, the Czech National Bank had expected a slower consumer price growth of 2.5% yoy in January.

Czech inflation fell to 2.8% yoy in January from 3.0% yoy in December. This is in line with the CZSO’s preliminary estimate. Like us, the Czech National Bank had expected a slower consumer price growth of 2.5% yoy in January.

Food and regulated prices were higher than our forecast. Prices for food and non-alcoholic beverages increased by 3.1% mom in January, while prices for alcohol and tobacco rose by 4.1% mom. Higher excise duties likely contributed to the increase in alcohol and tobacco prices. The annual price growth for the whole food category, including all beverages and tobacco, accelerated from 3.3% to 4.0% in January, pushing up headline inflation by 0.2pp compared with December. This was offset by a slowdown in annual growth in regulated prices from 6.6% to 1.5%, cutting headline inflation by 0.7-0.8pp. However, regulated prices rose by 0.8% mom in January. The decline in energy prices was surprisingly moderate, averaging only -0.4% mom, even slower than December’s -0.5% mom, and leading to -3.2% in annual terms. While electricity (-1.1% mom) and heating (-0.3% mom) prices fell, gas prices rose surprisingly (+1.2% mom). In January, fuel prices were 1.8% mom higher, leading to a slowdown in their annual decline from -2.7% to -0.4%, and adding 0.1pp to headline inflation.

Core inflation rose to 2.5% yoy in January from 2.3% yoy in December. This was slightly below both our estimate (2.7%) and the CNB’s forecast (2.6%). We estimate that seasonally adjusted core inflation fell from 0.20% to 0.18% mom. The yoy core inflation figure for January was boosted by the low base effect, so we should see a decline in the coming months. Moreover, core inflation remained close to the 2% target despite an acceleration in the growth of imputed rents from 1.7% to 2.9% yoy in January and paid rents from 6.2% to 6.6% yoy. This could offer support to our expectation that while housing prices should rise at a faster pace this year, other prices are likely to keep core inflation in check due to weak demand. In 3Q24, household consumption was still almost 5% lower than in the pre-pandemic period. Core inflation will also be important to watch in February. Last year, some sellers postponed the traditional price adjustment to February to give themselves time to see how much energy prices would rise. This year, however, energy prices have fallen, so we are unlikely to see a repeat of last year’s situation.

The structure of inflation should support further interest rate cuts by the CNB. We expect headline and core inflation to remain within the central bank’s tolerance band for the rest of this year, reflecting the weak economy and the effects of tight monetary policy. Moreover, the monetary-policy horizon now extends to 1H26, by which time inflation should have stabilised at around the 2% target. So far, central bankers have said that a decline in core inflation to close to the 2% target is a prerequisite for further interest rate cuts.

Kofola will only publish selected financial information (sales and EBITDA) and probably also a forecast for 2025. With the contribution of the acquired companies, especially the brewery group, we estimate 4Q24 EBITDA growth of +103% yoy to CZK236m. This is based on sales of CZK2.6bn (+25.5% yoy). Kofola will exceed its FY guidance on both EBITDA and total revenues.

Announcement date: Monday, February 17, 2025, at 5pm

Kofola will only publish selected financial information (sales and EBITDA) and probably also a forecast for 2025. With the contribution of the acquired companies, especially the brewery group, we estimate 4Q24 EBITDA growth of +103% yoy to CZK236m. This is based on sales of CZK2.6bn (+25.5% yoy). Kofola will exceed its FY guidance on both EBITDA and total revenues.

According to the latest 3Q24 results presentation, revenues grew +13% yoy in October and volumes were up +3% yoy including new acquisitions. Total sales for 4Q24 are expected to grow +25.5% yoy to CZK2.6bn according to our model.  We expect sweetener and PET prices to decline in the last quarter of last year. We also expect an increase in sales, general and administrative expenses. We estimate 4Q24 EBITDA to reach CZK236m. This represents a growth of +103% yoy. The high growth is due to acquisitions (mainly MIXA VENDING and Pivovary CZ) and a decline in raw material prices.

FY guidance exceeded: Kofola is expected to report full-year EBITDA of CZK1.84bn, which we estimate to be +46.7% yoy growth. We estimate total revenues at CZK11.2bn, or +29.2% yoy growth. Kofola thus exceeds its full-year EBITDA and revenue targets of CZK1.8bn.  Revenue growth of +25% yoy is expected.

The proposal for a dividend on 2024 profits is unlikely to be announced yet. Note that in addition to the standard dividend of CZK13.50, Kofola paid an advance dividend for 2024 of CZK7.50 last year. Given the significant increase in earnings, we expect Kofola to increase its dividend policy (CZK13.50 per share annually). We estimate that Kofola will pay a dividend of CZK19.10 for 2024.