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Coca-Cola Tops Forecasts - Guides Up

July 26, 2022

The Coca‑Cola reported second quarter 2022 results that demonstrate resilience in the marketplace amidst ongoing global challenges. The firm had adjusted earnings per share of 70 cents with only 67 cents expected. Adjusted revenue was also good at $11.3 billion with $10.56 billion expected.

The Atlanta-based company is looking for organic revenue growth of 12% to 13%. Its previous guidance was for growth of 7% to 8%. Net income came in at $1.91 billion, or 44 cents per share. Last year, it was $2.64 billion, or 61 cents per share.

“Our results this quarter reflect the agility of our business, the strength of our streamlined portfolio of brands, and the actions we’ve taken to execute for growth in the face of challenges in the operating and macroeconomic environment,” said James Quincey, Chairman and CEO of The Coca‑Cola Company. “We are staying true to our purpose, executing on our strategy and delivering value for our stakeholders.”

Quarterly Performance

  • Revenues: Net revenues grew 12% to $11.3 billion, and organic revenues (non-GAAP) grew 16%. Organic revenue (non-GAAP) performance was strong across operating segments and included 12% growth in price/mix and 4% growth in concentrate sales. Concentrate sales were 4 points behind unit case volume, largely due to the timing of concentrate shipments.
  • Margin: Operating margin, which included items impacting comparability, was 20.7% versus 29.8% in the prior year, while comparable operating margin (non-GAAP) was 30.7% versus 31.7% in the prior year. Comparable operating margin (non-GAAP) compression was primarily driven by strong topline growth, more than offset by the impact of the BODYARMOR acquisition, higher operating costs and an increase in marketing investments versus the prior year, and currency headwinds.
  • Earnings per share: EPS declined 28% to $0.44, and comparable EPS (non-GAAP) grew 4% to $0.70. Comparable EPS (non-GAAP) performance included the impact of a 9-point currency headwind.
  • Market share: The company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages.
  • Cash flow: Cash flow from operations was $4.5 billion year-to-date, a decline of $1.0 billion versus the prior year, as strong business performance was more than offset by the impact of cycling the timing of working capital benefits in the prior year and higher 2021 annual incentives in the current year. Free cash flow (non-GAAP) was $4.1 billion, a decline of $1.0 billion versus the prior year.

Company Updates

  • Leveraging strategic experimentation and scale to create global brand campaigns: The company is focused on leveraging and scaling experiments to better engage with and expand its consumer base. Coke Studio™, a program that connects the consumer passion point of music with consumption occasions, is one example. Coke Studio first launched in Pakistan, featuring established and emerging artists from various genres collaborating in live, studio recording sessions. Building on the success of the initial program, Coke Studio is evolving and expanding to a global stage as a digital-first, always-on music platform that spotlights breakthrough talent. The program also includes leveraging QR codes on packages to further engage consumers at the point of consumption through a ‘Drink. Scan. Enjoy.’ activation. Coke Studio represents the latest expression of the Real Magic™ global brand philosophy by creating curated multi-channel experiences for consumers.
  • Driving customer value and profitable growth through digital enablement: The company is working in close partnership with its bottlers to leverage the power of the system’s physical footprint in the online space, creating enhanced value for customers across the globe through eB2B platforms that drive an industry-leading experience. For instance, the myCoke™ eB2B platform, which is focused on North America, is a scaled mobile and web application that is generating incremental revenue growth opportunities and achieving strong outlet penetration, with high customer engagement. Year to date, the system revenue generated from myCoke has grown 55% compared to the comparable prior year period, and the company continues to advance on integrating myCoke across its customer base. The Coca‑Cola system continues to learn and adapt its digital commerce capabilities and investments.
  • Ongoing progress toward being asset light to drive sustainable system growth: The company continues its refranchising efforts, in line with its focus on building consumer-loved brands and driving scalable innovation. Recently, the company entered into an agreement to refranchise company-owned bottling operations in Cambodia and Vietnam with Swire Coca‑Cola Limited, a subsidiary of Swire Pacific Limited. Swire Coca‑Cola has operations in the Chinese mainland, Hong Kong, Taiwan and parts of the western United States.
  • Continuing to work toward a World Without Waste: The company is progressing on its strategy to develop a circular economy for packaging materials aimed at eliminating waste and reducing carbon emissions through the continual use of existing, valuable resources, including high-quality recycled PET. This includes ongoing work in packaging design. Leveraging the success of the label-less package, the company launched the label-less bottle for brand Coca‑Cola™ in the online channel in Japan, which is delivering strong performance. This is in addition to the use of 100% recycled PET bottles for 37 products under five brands already sold in the Japan market. Also, The Ellen MacArthur Foundation and The Coca‑Cola Company recently announced a strategic partnership, increasing their level of collaboration to the highest network tier of the foundation. The company’s virgin plastic reduction target and, more recently, global goal to reach 25% reusable packaging by 2030, signal circular economy leadership ambitions.

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