Coca-Cola To Announce Q1 Results, Expect Refranchising To Drag Down Top Line
The Coca-Cola Company (NYSE:KO) is scheduled to announce Q1 results on April 25, and even though the core performance might remain solid, both the top line and EPS are expected to take a hit due to the refranchising of bottling operations across geographies. 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%, boosted by increased pricing, favorable geographic mix, lower commodity costs, and productivity initiatives. The incoming CEO Mr. James Quincey, who is currently the Operations chief, has said that he plans for layoffs to ensue after he is appointed, but hasn’t disclosed how many positions he expects to be eliminated. Coca-Cola targets $3 billion in annual savings by 2019.
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. More of the same can be expected from Coca-Cola’s first quarter in 2017.
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Have more questions on Coca-Cola? See the links below.
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