Net Revenues Grew 6%; Organic Revenues
(Non-GAAP) Grew 6%
Operating Income Grew 8%; Comparable Currency
Neutral Operating Income (Non-GAAP) Grew 14%
Operating Margin Was 29.9%; Comparable
Operating Margin (Non-GAAP) Was 30.3%, Including the Impact from
Currency Headwinds and Acquisitions
EPS Grew 12% to $0.61; Comparable EPS
(Non-GAAP) Grew 4% to $0.63, Despite a 9% Currency Headwind
The Coca-Cola Company today reported strong operating results in
the second quarter of 2019, driven by consumer-centric innovation,
solid core brand performance and improved execution in the
marketplace. Reported net revenues and organic revenues (non-GAAP)
both grew 6% through balanced volume and price/mix, with all
operating segments contributing to organic revenue (non-GAAP)
growth. The company continued to gain global value share. The
company’s performance year-to-date led to an update in full year
guidance.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20190723005449/en/
“Our strategy to transform as a total beverage company has
allowed us to continue to win in a growing and vibrant industry,”
said James Quincey, chairman and CEO of The Coca-Cola Company. “Our
progress is positioning the company to create more value for all of
our stakeholders, including our shareowners.”
Highlights
Quarterly Performance
- Revenues: Net revenues grew 6% to $10.0 billion. Organic
revenues (non-GAAP) grew 6%. Revenue growth was driven by
concentrate sales growth of 4% and price/mix growth of 2%.
- Margin: Operating margin, which included items impacting
comparability, was 29.9% versus 29.4% in the prior year. Comparable
operating margin (non-GAAP) was 30.3% versus 30.6% in the prior
year. Strong underlying operating margin (non-GAAP) expansion was
offset by an approximate 185 basis point negative impact from
currency headwinds and net acquisitions.
- Earnings per share: EPS grew 12% to $0.61. Comparable
EPS (non-GAAP) grew 4% to $0.63. Comparable EPS growth included the
impact from a 9-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 $4.5
billion, up 68% largely due to strong underlying growth, working
capital initiatives and the timing of tax payments. Year-to-date
free cash flow (non-GAAP) was $3.7 billion, up 87%.
Company Updates
- Driving sparkling: Strong performance for the quarter
was driven by sparkling soft drinks, led by 4% volume and
transaction growth in trademark Coca-Cola. Coca-Cola Zero Sugar
continues to perform well, with a seventh consecutive quarter of
double-digit volume growth globally. Quarterly performance was
further driven by innovation, such as Coca-Cola Plus Coffee, and a
modernized marketing strategy for today's consumers. The company
reached a first-of-its-kind partnership with Netflix to temporarily
bring back 1985’s New Coke for the July 4 debut of season 3 of the
hit series "Stranger Things."
- Growing coffee: During the quarter, the company launched
the first-ever Costa Coffee ready-to-drink (RTD) chilled product in
Great Britain, marking the first major introduction since Coca-Cola
acquired Costa earlier this year. The company plans to roll out the
product in additional markets in the second half of the year. The
brand delivers an authentic coffee taste experience with 30% less
sugar than most RTD coffees in Costa’s core market of Great
Britain. The Costa Coffee brand is also expanding through a new
agreement with Coca-Cola HBC AG. The agreement will address a broad
range of consumer and customer needs across multiple channels and
occasions, including roast and ground coffee, RTD offerings and
vending. The bottler plans to introduce Costa Coffee in at least 10
markets in 2020.
- Expanding energy: The first energy drink under the
Coca-Cola brand launched in select European countries during the
quarter. Coca-Cola Energy features caffeine from naturally derived
sources, guarana extracts, B vitamins and no taurine, all with the
great Coca-Cola taste and feeling that people know and love. The
product has shown early signs of success. Coca-Cola Energy is now
available in 14 countries, including recent launches in Japan,
Australia and South Africa. The company expects to offer Coca-Cola
Energy in 20 markets by the end of 2019, including Mexico and
Brazil.
- Lifting, shifting and scaling: Since the company's
initial investment in the innocent business in 2009, the innocent
team has taken the business from the #1 smoothie brand in the U.K.
to the #1 chilled juice brand across Europe. The brand is now
expanding into Asia for the first time through a targeted rollout,
starting in Tokyo. Innocent is loved by consumers who want more
functional and nutritional benefits in their daily diet, in
addition to those who enjoy natural, delicious and healthy juices
and smoothies.
- Making progress in packaging: The company continues to
make progress on its World Without Waste goals for recycling,
recyclable packaging and the use of recycled materials, including
these recent milestones:
- Bottlers worldwide continue to introduce more brands in 100%
recycled PET (rPET) packaging. Recent launches include the green
tea brand Hajime Ichinichi Ippon in Japan; the Romerquelle and
Valser water brands in Austria and Switzerland, respectively; Viva
water in the Philippines; and San Luis water in Peru. In Western
Europe, 100% rPET bottles will be launched for smartwater,
Chaudfontaine and Honest by the end of 2019.
- Coca-Cola Amatil and Coca-Cola Australia announced that 70% of
all PET bottles in the market will be made from 100% rPET by the
end of 2019.
- Coca-Cola European Partners and Coca-Cola Great Britain
announced a switch from green to clear bottles for Sprite in their
markets as a way to improve recycling. Other markets are making
this change as well.
- Coca-Cola Beverages Philippines, the bottling arm of Coca-Cola
in the Philippines, announced that it will lead the investment in a
$19 million state-of-the-art, food-grade recycling facility that
will collect, sort, clean and wash post-consumer recyclable plastic
bottles and turn them into new bottles using advanced technology.
It is Coca-Cola’s first major investment in a recycling facility in
Southeast Asia.
- Coca-Cola Vietnam led the launch of an industry-backed
packaging recovery organization alongside other companies. The
organization will initially focus on increasing recovery and
recycling rates for three materials: PET, aluminum and Tetra
Pak®.
Tetra Pak® is a U.S. registered trademark of Tetra Laval
Holdings & Finance S.A.
Operating Review – Three
Months Ended June 28, 2019
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Items, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume
Consolidated
4
2
(6)
6
6
6
3
Europe, Middle East & Africa
3
1
(10)
3
(4)
4
2
Latin America
4
5
(11)
(1)
(3)
9
1
North America
(1)
4
0
0
3
3
(1)
Asia Pacific
8
(3)
(3)
0
2
5
7
Global Ventures3
5
(3)
(19)
218
201
2
5
Bottling Investments
14
3
(7)
(1)
9
18
30
Operating Income and EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
8
3
(8)
14
Europe, Middle East & Africa
(5)
0
(14)
9
Latin America
(1)
0
(13)
12
North America
10
6
0
4
Asia Pacific
4
0
(3)
7
Global Ventures
96
0
(4)
100
Bottling Investments
—4
—4
—4
—4
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated EPS
12
8
(9)
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 three
months ended June 28, 2019 was $119 million. Reported operating
loss for the three months ended June 29, 2018 was $17 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 2% for the quarter through solid pricing in the
marketplace across all operating segments. Concentrate sales growth
of 4% was ahead of unit case volume growth primarily due to the
timing of shipments in Brazil.
- Unit case volume grew 3%, driven by strong growth in developing
and emerging markets. Category cluster performance was as follows:
- Sparkling soft drinks grew 3%, driven by strong 4% global
growth in trademark Coca-Cola, including growth in original
Coca-Cola and continued double-digit growth in Coca-Cola Zero
Sugar.
- Juice, dairy and plant-based beverages volume was even as
strong performance in the Maaza brand in India and the innocent
business across Europe was 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 Mexico as well as the Kinley brand in
India, partially offset by a decline in the company's water brands
in Japan. The decline in Japan was primarily due to
deprioritization of low-margin commodity water brands.
- Tea and coffee volume declined 3% as growth in Fuze Tea across
Europe and Mexico was offset by a decline in the doğadan tea
business in Turkey, in addition to the company's tea brands in
Japan.
- Operating income grew 8% including a negative impact from
currency. Comparable currency neutral operating income (non-GAAP)
grew 14%. Operating income growth was driven by strong organic
revenue (non-GAAP) growth, a benefit from acquisitions and ongoing
productivity initiatives.
Europe, Middle East &
Africa
- Price/mix grew 1% for the quarter, which included a 2-point
headwind from geographic mix due to strong growth across key
African markets, including South Africa and Nigeria.
- Unit case volume grew 2%, as growth across the majority of
markets was partially offset by declines in Zimbabwe and the Middle
East. Growth was led by sparkling soft drinks and Fuze Tea.
- Operating income declined 5%, primarily due to a 14-point
currency headwind. Comparable currency neutral operating income
(non-GAAP) grew 9%, primarily driven by organic revenue (non-GAAP)
growth in addition to a benefit from the timing of expenses.
- The company gained value share in total NARTD beverages, led by
solid share performance across Europe, in addition to gaining share
across all category clusters.
Latin America
- Price/mix grew 5% for the quarter, largely driven by strong
performance in Mexico and Brazil, in addition to inflationary
pricing in Argentina.
- Unit case volume grew 1% as growth across the majority of key
markets, led by Brazil and Mexico, was partially offset by a
decline in Argentina.
- Operating income declined 1%, which included a 13-point
currency headwind. Comparable currency neutral operating income
(non-GAAP) grew 12%. Operating income growth was largely driven by
the benefit of strong pricing in the marketplace.
- The company lost value share in total NARTD beverages as a gain
in sparkling soft drinks was offset by a loss in packaged
water.
North America
- Price/mix grew 4% for the quarter, driven by sparkling soft
drinks.
- Unit case volume declined 1% partially due to the impact of
pricing and package initiatives executed in the marketplace, which
is driving positive price/mix performance. Positive performance in
trademark Coca-Cola was driven by double-digit growth in Coca-Cola
Zero Sugar and innovation such as Coca-Cola Orange Vanilla.
- Operating income grew 10%. Comparable currency neutral
operating income (non-GAAP) grew 4%. Growth was largely driven by
favorable product mix, with sparkling soft drinks as the main
driver.
- 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 declined 3% for the quarter, largely driven by
geographic mix due to growth in emerging and developing markets
outpacing developed markets.
- Unit case volume grew 7% due to broad-based growth across
nearly all key markets. Volume growth was led by India, Southeast
Asia and China.
- Operating income grew 4%. Comparable currency neutral operating
income (non-GAAP) grew 7%. Operating income growth was primarily
driven by organic revenue (non-GAAP) growth and a benefit from the
timing of expenses.
- 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 innocent product mix
as growth in juices outpaced smoothies, in addition to cycling
strong 8% price/mix growth in the prior year.
- Unit case volume grew 5% as strong growth in innocent and the
energy category was partially offset by a decline in the doğadan
tea business in Turkey.
- Operating income growth benefited from the Costa
acquisition.
Bottling Investments
- During the quarter, the company announced that it will maintain
its majority stake in Coca-Cola Beverages Africa (CCBA) for the
foreseeable future. As a result, CCBA is now presented within the
company’s results from continuing operations and is included in the
Bottling Investments operating segment.
- Price/mix grew 3% for the quarter, largely driven by solid
performance from CCBA and the company's bottling operations in
India.
- Operating income was favorably impacted by comparability items
and the acquisition of bottling operations in the Philippines.
Operating Review – Six
Months Ended June 28, 2019
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Items, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume
Consolidated
3
3
(6)
6
5
6
2
Europe, Middle East & Africa
4
5
(11)
3
0
9
2
Latin America
0
7
(13)
0
(6)
7
0
North America
(2)
4
0
0
2
2
(1)
Asia Pacific
7
(2)
(3)
(1)
0
4
7
Global Ventures3
1
0
(20)
220
201
1
3
Bottling Investments
9
3
(8)
(2)
3
13
23
Operating Income and EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
15
11
(9)
14
Europe, Middle East & Africa
0
0
(14)
15
Latin America
(7)
0
(16)
9
North America
13
7
0
6
Asia Pacific
1
0
(3)
3
Global Ventures
110
0
(6)
116
Bottling Investments
—4
—4
64
372
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
16
13
(9)
13
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 six
months ended June 28, 2019 was $219 million. Reported
operating loss for the six months ended June 29, 2018 was $342
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:
- 5% growth in organic revenues (non-GAAP) – Updated
- 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% currency headwind based
on the current rates and including the impact of hedged positions –
Updated
Full Year 2019 Operating Income:
- 11% to 12% 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): 7% to 8% 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 $8.5 billion – Updated
- Capital expenditures: Approximately $2.4 billion – Updated
- Net share repurchases (non-GAAP): Share repurchases to offset
dilution from employee stock-based compensation plans – No
Change
Third Quarter 2019 Considerations – New:
- Comparable net revenues (non-GAAP): 6% 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): 6% 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 second quarter 2019 operating results today,
July 23, 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/20190723005449/en/
Investors and Analysts: Tim
Leveridge, koinvestorrelations@coca-cola.com Media: Scott Leith, sleith@coca-cola.com
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