Net Revenues Grew 8%; Organic Revenues
(Non-GAAP) Grew 5%
Operating Income Declined 4%; Comparable
Currency Neutral Operating Income (Non-GAAP) Grew 5%
Operating Margin Was 26.3%; Comparable
Operating Margin (Non-GAAP) Was 28.1%; Margins Were Negatively
Impacted by Currency Headwinds and Acquisitions
EPS Grew 37% to $0.60; Comparable EPS
(Non-GAAP) Declined 2% to $0.56, Impacted by a 6% Currency
Headwind
The Coca-Cola Company continued to execute on its key strategies
in the third quarter, with strong revenue growth and value share
gains globally. Reported net revenues grew 8% and organic revenues
(non-GAAP) grew 5%, driven by innovation, revenue growth management
and improving execution. The company’s performance year-to-date has
led to an update in full year guidance.
This press release features multimedia. View
the full release here:
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"Our performance gives us confidence that our strategies are
taking hold with our consumers, customers and system," said James
Quincey, chairman and CEO of The Coca-Cola Company. "We are
positioning the company to create a better shared future for all of
our stakeholders by delivering on our vision and growing
sustainably."
Highlights
Quarterly Performance
- Revenues: Net revenues grew 8% to $9.5 billion. Organic
revenues (non-GAAP) grew 5%. Revenue growth was driven by price/mix
growth of 6%, partially offset by a 2% decline in concentrate
sales.
- Margin: Operating margin, which included items impacting
comparability, was 26.3% versus 29.8% in the prior year. Comparable
operating margin (non-GAAP) was 28.1% versus 30.7% in the prior
year. Margins were unfavorably impacted by a 260 basis point
headwind from currency and net acquisitions.
- Earnings per share: EPS grew 37% to $0.60. Comparable
EPS (non-GAAP) declined 2% to $0.56. Comparable EPS performance
included the impact from a 6-point currency headwind.
- Market share: The company continued to gain value share
in total nonalcoholic ready-to-drink (NARTD) beverages.
- Cash flow: Year-to-date cash from operations was $7.8
billion, up 37% largely due to strong underlying growth, working
capital initiatives and the timing of tax payments. Year-to-date
free cash flow (non-GAAP) was $6.6 billion, up 41%.
Company Updates
- Executing the revenue growth algorithm: The company
continues to capitalize on opportunities for growth through
expanded revenue growth management capabilities and improved
execution. Key initiatives include increasing availability and
distribution of priority SKUs. In Brazil, for example, expansion of
priority package offerings at key price points, along with placing
more than 100,000 incremental coolers in the marketplace, has led
to double-digit transaction growth of immediate consumption
priority packages year-to-date. Globally, growth in immediate
consumption packages outpaced future consumption by 6 points during
the quarter.
- Expanding headroom for growth in sparkling beverages:
Globally, trademark Coca-Cola has grown retail value 6%
year-to-date through an accelerated pace of innovation and
optimizing price/pack architecture in the marketplace. The largest
contributor to retail value growth was the flagship U.S. market,
driven by continued double-digit volume growth in Coca-Cola Zero
Sugar, in addition to strong growth in smaller packages, led by
double-digit growth in 7.5-oz. mini cans. Internationally, a scaled
launch of Coca-Cola Plus Coffee in more than 20 markets with a
diligent consumer focus, consistent messaging and an integrated
execution plan has driven strong performance year-to-date.
Accelerated revenue growth for core sparkling soft drink brands
continues to fuel and enable new innovations and investments across
the expanding total beverage portfolio.
- Disciplined portfolio growth of premium brands: During
the year, the company leveraged the leader, challenger, explorer
framework to successfully grow smartwater in India, where it has
become the second-largest premium water brand in the market since
its initial launch in 2018. In the explorer and challenger phase,
the company leveraged local celebrity endorsements and digital
marketing to drive brand edge while expanding distribution in
select channels as a premium offering. India is now the
fourth-largest market globally for the smartwater brand, with a
target to be in 90,000 outlets by the end of 2019.
- Expanding innovation through Coca-Cola Energy: The
company recently announced plans to bring new fans into the energy
drink category next year with the U.S. launch of Coca-Cola Energy.
Coca-Cola Energy and Coca-Cola Energy Cherry – a flavor available
exclusively in the United States – and their zero-calorie
counterparts will be available nationwide in 12-oz. sleek cans
starting in January 2020. The rollout supports ongoing efforts to
deliver more beverage options that meet changing preferences,
lifestyles and tastes. It’s also an example of the company’s
commitment to move quickly, bring more drinks to the shelf, and
"lift and shift" innovations around the world. Coca-Cola Energy
debuted earlier this year in Spain and Hungary and is currently
available in more than 25 countries.
- Growing sustainably through package innovation: During
the quarter, the company made solid progress on its World Without
Waste goals. In the United States, the company announced the goal
of removing the equivalent of at least 1 billion virgin PET plastic
bottles from its supply chain over the next five years. Dasani,
America’s leading mainstream bottled water brand, will roll out a
next-generation lineup of recyclable, reusable and package-free
options – anchored by the first-ever HybridBottle™, which is made
with a mix of up to 50% plant-based, renewable material and
recycled PET. The company also announced the expansion of up to 100
Dasani PureFill™ water dispensers leveraging Coca-Cola Freestyle™
technology in late 2019. Globally, the company now has seven
markets where its local water brand is packaged in 100% recycled
PET. The company also continues to lightweight its packaging to
reduce the amount of virgin PET plastic sourced by the Coca-Cola
system.
Operating Review – Three
Months Ended September 27, 2019
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume
Consolidated
(2)
6
(3)
6
8
5
2
Europe, Middle East & Africa
1
3
(7)
3
0
4
1
Latin America
(8)
20
(8)
0
4
12
1
North America
(1)
3
0
(1)
2
3
1
Asia Pacific
3
0
1
0
3
3
4
Global Ventures3
17
(3)
(14)
243
243
14
15
Bottling Investments
7
2
(3)
2
8
9
24
Operating Income and EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
(4)
(3)
(7)
5
Europe, Middle East & Africa
(5)
0
(11)
7
Latin America
(6)
0
(11)
5
North America
(3)
(3)
0
0
Asia Pacific
(3)
(7)
1
3
Global Ventures
75
0
(4)
79
Bottling Investments
(70)
—4
—4
—4
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated EPS
37
39
(6)
4
Note: Certain rows may not add due to
rounding.
1 For Bottling Investments, this
represents the percent change in net revenues attributable to the
increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes.
2 Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3 With the exception of ready-to-drink
(RTD) products, Costa sales are not included in concentrate sales,
price/mix or unit case volume.
4 Comparable operating income (non-GAAP)
for the three months ended September 27, 2019 was $30 million.
Comparable operating loss (non-GAAP) for the three months ended
September 28, 2018 was $14 million. Therefore, the percentages are
not calculable.
In addition to the data in the preceding tables, operating
results in the quarter included the following:
Consolidated
- Price/mix grew 6% for the quarter through revenue growth
management initiatives and a benefit from geographic mix.
Concentrate sales were 4 points behind unit case volume growth due
to the timing of shipments during the quarter, in addition to
cycling the timing of shipments in Brazil in the prior year.
- Unit case volume grew 2%, primarily driven by strong growth in
developing and emerging markets in addition to solid growth in
North America. Category cluster performance was as follows:
- Sparkling soft drinks grew 2%, driven by strong 3% global
growth in trademark Coca-Cola, including continued double-digit
growth in Coca-Cola Zero Sugar.
- Juice, dairy and plant-based beverages grew 1%, led by strong
performance within the Minute Maid and Simply portfolio in North
America in addition to strong growth in Minute Maid Pulpy in China,
partially offset by a decline in Rani, the leading juice brand in
the Middle East.
- Water, enhanced water and sports drinks grew 2%, led by the
Ciel and Cristal brands in Latin America and strong growth in
Dasani internationally as well as Kinley in India, partially offset
by the deprioritization of low-margin commodity water in
China.
- Tea and coffee volume grew 4%, led by strong performance across
the company's portfolio in Japan, in addition to the doğadan tea
business in Turkey and Gold Peak tea in North America.
- Operating income declined 4%, including a negative impact from
currency. Comparable currency neutral operating income (non-GAAP)
grew 5%. Operating income was negatively impacted by cycling the
timing of concentrate shipments and expenses in the prior year, in
addition to the timing of certain items in the current year,
including marketing investments.
Europe, Middle East &
Africa
- Price/mix grew 3% for the quarter through positive performance
across the majority of key markets.
- Unit case volume grew 1%, as strong growth across West and
South Africa was partially offset by a decline in Europe, which was
impacted by cycling strong performance in the prior year.
- Operating income declined 5%, primarily due to an 11-point
currency headwind. Comparable currency neutral operating income
(non-GAAP) grew 7%, primarily driven by favorable product mix.
- The company gained value share in total NARTD beverages, led by
solid share performance across Europe, partially offset by a value
share decline in Nigeria, primarily due to local value brands.
Latin America
- Price/mix grew 20% for the quarter, through strong pricing and
package initiatives in the marketplace, in addition to a benefit
from cycling the timing of deductions in the prior year.
- Unit case volume grew 1%, as growth across the majority of
markets, led by Brazil and Mexico, was partially offset by a
decline in Argentina. Volume growth benefited from acquired brands
in Central America.
- Operating income declined 6%, which included an 11-point
currency headwind. Comparable currency neutral operating income
(non-GAAP) grew 5%. Operating income was impacted by cycling the
timing of concentrate shipments in Brazil in the prior year.
- The company gained value share in total NARTD beverages, led by
solid share performance in Brazil.
North America
- Price/mix grew 3% for the quarter, driven by solid performance
across the majority of category clusters.
- Unit case volume grew 1%, led by strong performance in
sparkling soft drinks under trademark Coca-Cola and Sprite. All
category clusters grew volume during the quarter, with the
exception of tea and coffee, which was even.
- Operating income declined 3%, which included the impact of
comparability items. Comparable currency neutral operating income
(non-GAAP) was even. Operating income was negatively impacted by
cycling the benefit of intercompany profit elimination in the prior
year related to the refranchising of North American bottling
operations, as well as cycling the timing of expenses in the prior
year.
- The company gained value share in total NARTD beverages, led by
strong performance in sparkling soft drinks; water, enhanced water
and sports drinks; and juice, dairy and plant-based beverages.
Asia Pacific
- Price/mix was even for the quarter, negatively impacted by 4
points of geographic mix due to growth in emerging and developing
markets outpacing developed markets.
- Unit case volume grew 4%, due to broad-based growth across the
majority of key markets, partially offset by a decline in Japan.
Volume growth was led by Southeast Asia, China and India.
- Operating income declined 3%, which included the impact of
comparability items. Comparable currency neutral operating income
(non-GAAP) grew 3%. Operating income was negatively impacted by
geographic mix.
- The company gained value share in total NARTD beverages, driven
by strong performance in China and Southeast Asia.
Global Ventures
- Reported net revenues benefited from the Costa
acquisition.
- Price/mix declined 3%, largely driven by unfavorable product
mix as a result of strong growth in the doğadan tea business.
- Unit case volume grew 15%, led by the doğadan tea business in
Turkey, in addition to strong growth in Monster and innocent.
- Operating income growth benefited from the Costa
acquisition.
Bottling Investments
- Price/mix grew 2% for the quarter, largely driven by solid
performance from the company's bottling operations in India.
- Operating income was driven by strong revenue growth, partially
offset by the impact of comparability items and currency
headwinds.
Operating Review – Nine
Months Ended September 27, 2019
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume
Consolidated
1
4
(5)
6
6
6
2
Europe, Middle East & Africa
3
4
(10)
3
0
7
2
Latin America
(2)
11
(11)
0
(3)
9
0
North America
(2)
4
0
0
2
2
0
Asia Pacific
5
(2)
(2)
(1)
1
4
6
Global Ventures3
7
(1)
(18)
227
214
5
7
Bottling Investments
9
3
(6)
(1)
4
11
23
Operating Income and EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
8
6
(8)
11
Europe, Middle East & Africa
(1)
0
(13)
12
Latin America
(7)
0
(15)
8
North America
7
3
0
4
Asia Pacific
(1)
(2)
(1)
3
Global Ventures
96
0
(5)
101
Bottling Investments
—4
—4
35
2,225
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
23
22
(8)
10
Note: Certain rows may not add due to
rounding.
1 For Bottling Investments, this
represents the percent change in net revenues attributable to the
increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes.
2 Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3 With the exception of RTD products,
Costa sales are not included in concentrate sales, price/mix or
unit case volume.
4 Reported operating income for the nine
months ended September 27, 2019 was $226 million. Reported
operating loss for the nine months ended September 28, 2018 was
$318 million. Therefore, the percentages are not calculable.
Outlook
The 2019 outlook information provided below includes
forward-looking non-GAAP financial measures, which management uses
in measuring performance. The company is not able to reconcile full
year 2019 projected organic revenues (non-GAAP) to full year 2019
projected reported net revenues, full year 2019 projected
comparable currency neutral net revenues (non-GAAP) to full year
2019 projected reported net revenues, full year 2019 projected
comparable currency neutral operating income (non-GAAP) to full
year 2019 projected reported operating income, or full year 2019
projected comparable EPS (non-GAAP) to full year 2019 projected
reported EPS without unreasonable efforts because it is not
possible to predict with a reasonable degree of certainty the
actual impact of changes in foreign currency exchange rates; the
exact timing and amount of acquisitions, divestitures and/or
structural changes; and the exact timing and amount of
comparability items throughout 2019. The unavailable information
could have a significant impact on full year 2019 GAAP financial
results.
Full Year 2019 Revenues:
- At least 5% growth in organic revenues (non-GAAP) –
Updated
- At least 12% growth in comparable currency neutral net revenues
(non-GAAP), including a 7% tailwind from acquisitions, divestitures
and structural items – Updated
- Comparable net revenues (non-GAAP): 4% to 5% currency headwind
based on the current rates and including the impact of hedged
positions – Updated
Full Year 2019 Operating Income:
- 12% to 13% growth in comparable currency neutral operating
income (non-GAAP), including a low single-digit tailwind from
acquisitions, divestitures and structural items – Updated
- Comparable operating income (non-GAAP): 8% to 9% currency
headwind based on the current rates and including the impact of
hedged positions – Updated
Full Year 2019 EPS:
- -1% to 1% growth versus $2.08 in 2018 in comparable EPS
(non-GAAP) – No Change
Full Year 2019 Other Items:
- Underlying effective tax rate (non-GAAP): Estimated to be 19.5%
– No Change
- Cash from operations: At least $8.8 billion – Updated
- Capital expenditures: Approximately $2.2 billion – Updated
- Net share repurchases (non-GAAP): Expect share repurchases to
offset dilution from employee stock-based compensation plans – No
Change
Fourth Quarter 2019 Considerations – New:
- Comparable net revenues (non-GAAP): 12% tailwind from
acquisitions, divestitures and structural items; 3% currency
headwind based on the current rates and including the impact of
hedged positions
- Comparable operating income (non-GAAP): 7% currency headwind
based on the current rates and including the impact of hedged
positions
Full Year 2020 Considerations – New:
- Comparable net revenues (non-GAAP): 1% to 2% currency headwind
based on the current rates and including the impact of hedged
positions
- Comparable operating income (non-GAAP): 2% to 3% currency
headwind based on the current rates and including the impact of
hedged positions
Notes
- All references to growth rate percentages and share compare the
results of the period to those of the prior year comparable
period.
- All references to volume and volume percentage changes indicate
unit case volume, unless otherwise noted. All volume percentage
changes are computed based on average daily sales, unless otherwise
noted. "Unit case" means a unit of measurement equal to 24
eight-ounce servings of finished beverage. "Unit case volume" means
the number of unit cases (or unit case equivalents) of company
beverages directly or indirectly sold by the company and its
bottling partners to customers.
- "Concentrate sales" represents the amount of concentrates,
syrups, beverage bases, source waters and powders/minerals (in all
instances expressed in equivalent unit cases) sold by, or used in
finished beverages sold by, the company to its bottling partners or
other customers. In the reconciliation of reported net revenues,
"concentrate sales" represents the percent change in net revenues
attributable to the increase (decrease) in concentrate sales volume
for the geographic operating segments and the Global Ventures
operating segment (excluding Costa non-RTD sales) (expressed in
equivalent unit cases) after considering the impact of structural
changes. For the Bottling Investments operating segment, this
represents the percent change in net revenues attributable to the
increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes. The Bottling Investments operating segment reflects unit
case volume growth for consolidated bottlers only.
- "Price/mix" represents the change in net operating revenues
caused by factors such as price changes, the mix of products and
packages sold, and the mix of channels and geographic territories
where the sales occurred.
- First quarter 2019 financial results were impacted by one less
day as compared to the same period in 2018, and fourth quarter 2019
financial results will be impacted by one additional day as
compared to the same period in 2018. Unit case volume results for
the quarters are not impacted by the variances in days due to the
average daily sales computation referenced above.
Conference Call
The company is hosting a conference call with investors and
analysts to discuss third quarter 2019 operating results today,
Oct. 18, 2019, at 8:30 a.m. ET. The company invites participants to
listen to a live webcast of the conference call on the company’s
website, http://www.coca-colacompany.com, in the "Investors"
section. An audio replay in downloadable digital format and a
transcript of the call will be available on the website within 24
hours following the call. Further, the "Investors" section of the
website includes certain supplemental information and a
reconciliation of non-GAAP financial measures to the company’s
results as reported under GAAP which may be used during the call
when discussing financial results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191018005175/en/
Investors and Analysts: Tim
Leveridge, koinvestorrelations@coca-cola.com Media: Scott Leith, sleith@coca-cola.com
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