Coke's Revenue Slides as Soda Volume Declines--2nd Update
July 27 2016 - 11:46AM
Dow Jones News
By Anne Steele and Mike Esterl
Coca-Cola Co. said revenue slid more than expected in the latest
quarter on a decline in soda volume amid continued weakness abroad,
particularly in developing markets.
Shares lost 3.5% to $43.33 in morning trading as the company
posted flat overall volume.
Atlanta-based Coke also gave full-year guidance for comparable
earnings per share below Wall Street expectations, saying it
anticipates the metric to decline 4% to 7% from a year earlier,
implying a range of $1.86 to $1.92. Analysts polled by Thomson
Reuters had forecast $1.94.
The company said it now expects organic revenue -- which strips
out foreign-exchange swings and structural items -- to increase
just 3% this year. That is down from its earlier forecast of 4% to
5% growth.
The company reiterated it still expects adjusted pretax income
to increase 6% to 8% in 2016, boosted by higher pricing and a $3
billion cost-cutting program that has lifted operating margins.
Overseas weakness has damped Coke's results recently, with key
countries such as Russia and Brazil in recession, lower consumer
demand in Europe and China's economy slowing. The stronger U.S.
dollar has also hurt the company, which generates about half its
sales abroad but translates results into dollars.
Higher prices and smaller packaging in the U.S. that costs
consumers more per ounce has helped Coke offset those declines. In
the quarter, Coke reported that its beverage volumes were flat
world-wide but grew 1% in its key North American market.
Coke said it increased prices 3% globally as the company
increasingly focuses on revenue, not volume, to fuel growth.
But the most recent quarter represented the first time that
Coke's overall volumes didn't grow since 1999. It was also the
first time that soda volumes declined since the first quarter of
2014.
On Wednesday, Chief Executive Muhtar Kent said "challenging
macroeconomic conditions, structural changes and foreign-exchange
headwinds" dragged on the top line, but he pointed to 3% organic
revenue growth.
He said strong performance in the company's largest and most
developed markets, including the U.S., Mexico and Japan, was offset
by difficult external conditions in emerging and developing
markets, including China and Argentina.
"These factors combined to put pressure on our volume and
top-line performance in the quarter, especially where we own
bottling businesses, " Mr. Kent said. "In these international
operations where external headwinds have proven to be more severe
than originally forecast, we are taking action by reassessing local
market initiatives where needed."
During the quarter, noncarbonated drinks, which include tea,
packaged water and sports drinks, grew 2%, driven by strong
performance across most categories except for juice and juice
drinks, which declined due to industry weakness in China.
Soda volumes declined 1% in the quarter globally -- on weakness
in certain emerging markets -- and in North America, where growth
in Sprite, Fanta and energy drinks was offset by a decline in the
namesake Coca-Cola brand.
In all for the quarter, Coke posted a profit of $3.45 billion,
or 79 cents a share, up from $3.12 billion, or 71 cents a share, a
year earlier. Excluding certain items, per-share earnings were 60
cents, topping the 58 cents analysts had forecast. The company said
foreign exchange shaved 10 percentage points off its per-share
earnings in the quarter.
Revenue slipped 5.1% to $11.54 billion, below analysts'
prediction for $11.64 billion.
Write to Anne Steele at Anne.Steele@wsj.com and Mike Esterl at
mike.esterl@wsj.com
(END) Dow Jones Newswires
July 27, 2016 11:31 ET (15:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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