Kepler Cheuvreux’s analyst Richard Withagen has revised his outlook on Coca-Cola HBC (LON:CCH), downgrading the stock rating from Hold to Reduce due to concerns surrounding the company’s recent strategic move to acquire Coca-Cola Beverages Africa (CCBA). According to Withagen, the considerable acquisition amounting to $3.4 billion is poised to present execution risks and could impede value creation in the near future.
The analyst also lowered the target price for Coca-Cola HBC shares from 3,830 pence to 3,400 pence, reflecting a more cautious stance. Following this update, the stock price dropped approximately 1.5% on the London market by 11:50 GMT.
The CCBA deal, announced in October 2025, is expected to add roughly 25% to Coca-Cola HBC’s group revenues on a combined pro forma basis. The company promotes this acquisition primarily as a growth strategy rather than focusing on cost reductions.
However, Withagen pointed out that CCBA’s financial performance in recent years has not been robust. Although revenue has increased, earnings before interest and taxes (EBIT) in 2024 remained below levels seen before the COVID-19 pandemic.
Critically, the acquisition does not appear to enhance Coca-Cola HBC’s growth profile. CCBA’s organic revenue growth, approximately 7% in recent years, trails behind Coca-Cola HBC’s own growth rate, and currency fluctuations have offset about half of this revenue expansion. The analyst also highlighted persistent losses in market share within South Africa, CCBA’s largest market, as a significant area of concern.
Given these factors, Withagen concluded that the acquisition is unlikely to prompt Coca-Cola HBC management to alter its mid-term organic growth target of 6-7%.
For the deal to generate value accretion, Withagen estimates that Coca-Cola HBC would need to markedly accelerate growth and approximately double CCBA’s operating margins. He noted that CCBA’s average EBIT margin hovered around 6% during 2023–24, and reaching the necessary improvement is expected to be a multi-year process.
In the immediate timeframe, the acquisition is predicted to dilute overall profitability metrics for the group. The pro forma impact on Coca-Cola HBC’s EBIT margin is an estimated reduction of about 100 basis points, while return on invested capital (ROIC) could decline by around 500 basis points.
Nonetheless, Withagen suggested that the company’s balance sheet should remain stable post-acquisition, with net debt to EBITDA expected to stay under 2 times.