FX headwinds, acquisition costs and divestitures weigh on Coca-Cola sales and profits
The Coca-Cola Company (TCCC) reported its fourth quarter and full-year results on Thursday, with revenue falling 6% for the quarter to $9.4bn, from $10bn in the same period in 2015. It would be the seventh quarterly drop for the company. Full-year sales also fell 5% to $42bn, from $44bn in the prior year, blamed on foreign exchange headwinds, weakened economies abroad, cost of acquisitions and divestitures tied to its bottler refranchising.
The soft drinks giant said that costs related to the refranchising of its U.S. bottling operations came in higher than expected and hurt Q4 and full-year results, with fourth quarter net profit declining 55% to $550m, from $1.24bn, while full-year net income fell 11% to $6.5bn, from $7.4bn.
Coca-Cola has been selling-off its low margin bottling business to franchises so it can focus on selling higher margin concentrates and beverage bases to its bottlers. The company has also stepped up efforts in building-up its non-carbonated drinks portfolio such as tea, juices, water and energy drinks as consumer appetite for sugary drinks wane.
The soda giant saw some bright spots in its fourth quarter and full year results, as its North American flagship market rose 8% in the fourth quarter and 4% for the full-year, driven by repackaging of its soda brands in smaller sizes which boosted sales. The company said that “smaller cans will be introduced in struggling emerging and developing markets as a more affordable option,” said Chief Operating Officer, James Quincey, who will be taking over the CEO position on 1st May, 2017.
The world’s largest soft drinks company said it is estimating 2017 adjusted earnings to decline between 1 – 4 percentage points.