Three factors complicated Q3: the SDIL (from April), CO2 shortages and the heatwave. BVIC managed these resiliently, with Q3 total revenue growth of 3.4%, taking the year to date to 4.2% (H1: 4.5%). On an ex-SDIL basis Q3 declined 0.6%. That was led by GB sales +1.9% with outstanding stills growth of 11.7%, where, responding to the CO2 issue, marketing was switched from carbonates, -2.9%. Regions mainly grew strongly: Ireland +6.6% ex-SDIL, Brazil +10.2%, international (mainly US) +8.7%. France declined 15.0%, on strong comps and poor weather. 

Within carbonates, Pepsi continued to gain share, led by the no-sugar Pepsi Max. Meanwhile, buoyed by the marketing switch, stills showed strong growth for both Robinsons, which has been re-establishing share, and J2O. A range of H2 activation actions, highlighted at interim, are being executed effectively in wider regions. Management, which has guided to a net zero profit effect from SDIL, should be able to give a clearer analysis of any net impact at the year end. 

BVIC guides to full-year performance in line with consensus. FY18 is a transition year for BVIC’s business capability programme (FY16-19), which should deliver long-term benefits including supply efficiencies. A 3.4% yield is twice covered and supported by net debt leverage guided at 2.1–2.3x. 

BVIC trades at a FY18e P/E of 14.9x, a 31.8% discount to the All-Share Beverages current year index and a 28.8% discount to AG Barr, reflecting its relatively geared balance sheet and relatively slow near-term earnings growth. However, with FY18 now effectively confirmed, market attention should switch to the higher-growth FY19 forecast (PBT +10.7%, EPS +6.3%), which could see those discounts narrow.