Coca-Cola’s Organic Revenue Grows 3% In Q3; Results Marred By Structural Changes
The Coca-Cola Company (NYSE:KO) reported its Q3 results on October 26, and it was another quarter where negative currency translations and structural changes hindered top line growth. Organic revenue rose 3% year-over-year in Q3, but net revenue declined 7% due to a 2 percentage point impact of currency fluctuations and a larger 8% impact of acquisitions, divestitures, and other structural effects.
Coca-Cola is moving away from a capital-intensive organization with its intended refranchising plans for North America, China, and structural changes in Europe and Africa. The company is looking to refranchise two-thirds of its bottling territories in North America by the end of 2017, and a substantial portion of the remaining territories no later than 2020, in a bid to move away from the capital intensive and low-margin business of distribution. All this in hopes to improve operating performance. Coca-Cola signed six definitive agreements and closed four transactions recently, thereby remaining on track to complete its refranchising efforts in North America by the end of 2017.
Two of the largest Coca-Cola bottlers in Japan, Coca-Cola West and Coca-Cola East Japan, reached an agreement to merge their operations and create one strong bottling unit, which will comprise 85% of Coca-Cola’s volume in the country. In the start of the third quarter, Coca-Cola 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. Furthermore, the company has reached a long-term agreement with Arca Continental for joint value creation in Mexico.
Coca-Cola has been able to maintain solid margin through the first three quarters of the year boosted by increased pricing, favorable geographic mix, lower commodity costs, and productivity initiatives. The company’s operating margin rose to 22.4% through September, up 140 basis points year-over-year. Coca-Cola might have recorded a decline in revenue over the last few quarters, but this is because the company is in transition. The positive for the company remains its solid organic growth, which is expected to continue into Q4.
Have more questions on Coca-Cola? See the links below.
- 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
- Why Do Sodas Form 73% Of The Net Volume For Coca-Cola But Just Over 60% Its Value?
- Contribution Of U.S. Soda Sales In Coca-Cola’s Overall Revenue Could Decline To Less Than 15% By 2020
- Why Coca-Cola’s Dependence On Powerade And Other Brands Is Growing
- What Is Coca-Cola’s Revenue And Gross Profit Breakdown?
- What’s Coca-Cola’s Fundamental Value Based On Expected 2016 Results?
- How Has Coca-Cola’s Revenue And Gross Profit Composition Changed Over 2012-2016E?
- By What Percentage Have Coca-Cola’s Revenues And Gross Profit Grown Over The Last Five Years?
- Where Will Coca-Cola’s Revenue And Gross Profit Growth Come From Over The Next Three Years?
Notes:
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)