Coca-Cola full-year profit falls below Wall Street forecast

Strong dollar, among other things, has been blamed for Coca-Cola’s failure to meet Wall Street expectations for the carbonated soft drink company’s full-year profit, with revenue falling in the fourth quarter.

Coca-Cola reported a quarterly decline in volumes in North America, sending its shares down by 3 per cent, the company’s financial statements, which were released to the London Stock Exchange on Thursday showed.

According to reports, Coke raised prices of its beverages at the expense of falling demand, but the market performance was described good by the company, stating revenue grew above company’s target.

Reason for falling below expectation

The company’s financial statement stated that food packaging companies were facing the brunt of rising freight and commodity costs and a dearth of truck drivers leading to squeezed margins and higher costs.

The company forecast full-year profit to be between 2.06 dollars and 2.10 dollars per share far below the average expectation of 2.23 dollars, blaming a stronger dollar.

Breakdown of Coca-Cola’s forecast

Net income attributable to the company’s shareholders was $870 million or 20 cents per share in the fourth quarter ended December 31, 2018, compared to a loss of $2.75 billion or 65 cents per share, a year earlier, when the company took a tax-related charge.

Revenue fell by 6 per cent to $7.1 billion in the fourth quarter, hurt by the refranchising of its low-margin bottling operations. Analysts had estimated sales of $7.03 billion dollars, according to Reuters data.

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Coca-Cola’s net sales revenue increased by 6 per cent on a foreign exchange-neutral basis, the company said in its financial results for the full year ended December 31, 2018. Adding that volume growth accelerated to 4.2 per cent with growth in all segments, driven by sparkling beverages.

While the volume of sales in Nigeria, however, decline amid the competitive environment. To strengthen the company’s presence in the Nigerian market, Coca-Cola recently concluded the acquisition of Chi Limited.

There was a 20 basis-point reduction in comparable operating expenses as a percentage of revenue and its free cash flow stood at €370 million.

The board of directors proposed a €0.57 dividend per share, which is a 5.6 per cent increase on the 2017 dividend.

Company reaction to forecast

The Chief Executive Officer, Coca-Cola HBC AG, Zoran Bogdanovic, said the company experienced good performance in revenue, adding that price/mix improved for the 8th consecutive year.

“in 2018, we delivered another very good performance with revenue growth above our target range and another step up in margins.

“strong volume growth in all our segments was helped by a record number of new product launches, while price/mix improved for the eighth consecutive year. this growth supported margin progress, which we delivered while increasing our investment in marketing.”

While Coca-Cola invested in the business for growth, Bogdanovic disclosed that the company’s sharp focus on cost efficiencies continued. Adding that the shape of the business, capabilities and commitment of the people and the company’s overall commercial proposition gives the confidence in the ability to continue to grow revenues and margins.

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