Coca-Cola Wraps Up Another Transitional Year With Solid Core Performance
The Coca-Cola Company (NYSE:KO) reported a revenue decline for its Q4 and full year as expected, ending yet another transitional year in 2016. Negative effects of currency translation and structural impacts were a significant deterrent to Coca-Cola’s top line growth last year. While organic revenue grew 3% year-over-year for the company in 2016, organic revenue for the company at core (what will remain post refranchising) grew 4% in the year. This reflects solid core performance by Coca-Cola, which has battled with slowing revenue growth, especially in the carbonated soft drinks (CSDs) segment, which forms almost two-thirds the net volumes for the beverage manufacturer.
Coca-Cola is in transition, moving away from a capital-intensive organization with its intended refranchising plans for North America, China, and structural changes in Europe and Africa. By the end of this year, the company aims to refranchise two-thirds of its bottling territories in North America, and aims to refranchise a substantial portion of the remaining territories no later than the end of the decade. All this in a bid to move away from the capital intensive and low-margin business of distribution and improve its operating performance. Coca-Cola has been able to improve its operational performance in 2016, improve margin by 90 basis points year-over-year to 20.6% in 2016, boosted by increased pricing, favorable geographic mix, lower commodity costs, and productivity initiatives.
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Through the last year, Coca-Cola signed a definitive agreement with COFCO Coca-Cola Beverages Limited and Swire Beverages Holdings Limited to refranchise all existing Company-owned bottling operations in China, and announced that it had completed the Coca-Cola European Partners and Coca-Cola Beverages Africa transactions, and the transfer of certain territories in the United States to Arca Continental, and Coke’s UNITED bottlers.
The refranchising efforts and other structural impacts are expected to cause as much as an 18% to 19% headwind to the top line this year, but what remains the silver lining for the company is the expected stable growth for its core business. Organic revenue is expected to grow another 3% in 2017, with a 7% to 8% growth in comparable currency neutral income before taxes (structurally adjusted) driven by strong operating performance.
Have more questions on Coca-Cola? See the links below.
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- Coca-Cola’s Organic Revenue Grows 3% In Q3; Results Marred By Structural Changes
- Coca-Cola Faces The Sugar-Tax Problem In South Africa
- Coca-Cola Set To Enter The Coffee Market In Brazil
- Coca-Cola’s Structural Changes Dent Q2 Results
- Here’s How Favorable Price Mix Is Helping Coca-Cola And PepsiCo Increase Soft Drink Revenue
- Coca-Cola Earnings Review: Carbonates Drag Down Results Yet Again
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- Where Will Coca-Cola’s Revenue And Gross Profit Growth Come From Over The Next Three Years?
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