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Coca-Cola Company reports strong Q4 & full year 2017 operating results
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Monday, 19 February, 2018, 08 : 00 AM [IST]
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Atlanta
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The Coca-Cola Company delivered strong operating results for the fourth quarter and achieved or exceeded its full year guidance in 2017. While reported net revenues continued to be impacted primarily by ongoing refranchising initiatives, the company delivered broad-based organic revenue [non-generally accepted accounting principles (GAAP)] growth across all operating segments as well as profit growth.
“I am pleased with our accomplishments and results in 2017,” said James Quincey, president and chief executive officer, The Coca-Cola Company.
“We achieved or exceeded our full-year guidance while driving significant change as we continued to transform into a total beverage company. While there is still much work to do, I am encouraged by our momentum as we head into 2018,” he added.
Throughout 2017, the company made progress in transforming the culture of the organization to be more nimble and entrepreneurial. Its lean centre initiative reshaped the corporate structure to support faster growth and empower field operations to act with more speed and independence.
In the fourth quarter, it announced changes to its talent and compensation philosophy, placing a sharper focus on performance and future potential to drive long-term growth.
The company also achieved major milestones in strengthening the system and returning to a capital-light organisation, including a fully-refranchised bottling system in the United States.
Outside of the United States, it refranchised previously owned bottling operations in China to local partners.
The system’s two largest bottlers in Japan merged, creating a single bottler covering the vast majority of volume in that key market.
Additionally, the company completed the ownership transition of bottling operations in Africa, temporarily acquiring majority ownership of Coca-Cola Beverages Africa until it is refranchised.
Highlights
Quarterly/Full-year performance
Revenues
Net revenues declined 20 per cent to $7.5 billion for the quarter and declined 15 per cent to $35.4 billion for the year, impacted by headwinds of 26 per cent and 17 per cent, respectively, from the ongoing refranchising of bottling territories. Organic revenues (non-GAAP) grew six per cent for the quarter, driven by price/mix growth of four per cent and concentrate sales growth of one per cent. The quarter included one additional day, which equated to an approximate one-point benefit to organic revenue (non-GAAP) growth. For the year, organic revenues (non-GAAP) grew three per cent, driven by a price/mix growth of three per cent.
Volume
Total unit case volume was even for the quarter and full year. Developing and emerging markets generated positive volume growth for the second consecutive quarter, including volume growth in Brazil. While volume growth in developed markets overall was even during the quarter, North America volume grew one per cent.
Margin
Operating margin, which included items impacting comparability, grew over 315 and 55 basis points for the quarter and full year, respectively. Comparable operating margin (non-GAAP) expanded more than 530 and 350 basis points for the quarter and full year, respectively. Margin expansion was driven by divestitures of lower-margin bottling businesses and the company’s ongoing productivity efforts.
Market share
The company continued to gain value share in total non-alcoholic ready- to-drink (NARTD) beverages for the quarter and full year. Value share growth outpaced volume share performance, reflecting the company’s continued shift in focus to value growth from volume growth.
Cash flow
Cash from operations for the full year was $7 billion, down 20 per cent. Full-year free cash flow (non-GAAP) was $5.3 billion, down 19 per cent. The declines were primarily driven by comparability items related to the refranchising of North America bottling territories, including the establishment of third-party receivables and cash restructuring charges.
Share repurchases
Full-year purchases of stock for treasury were $3.7 billion. Net share repurchases (non-GAAP) totalled $2 billion.
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