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The Coca-Cola Company Reports Full-Year And Fourth Quarter 2013 Results

Stocks in this article: KO

Despite global volume growth below our expectations and long-term growth target, we delivered sound financial results for the full year. Excluding the impact of structural changes, primarily the deconsolidation of certain Company-owned bottling operations, the Company delivered comparable currency neutral net revenue growth of 3%, capturing global price/mix of 1%. Importantly, excluding the impact of structural changes, we grew comparable currency neutral operating income 6% for 2013. We also grew comparable currency neutral EPS 8% for the year. Both of these profit growth rates are in line with our long-term targets. In 2013, we returned $8.5 billion in cash to our shareowners through dividends and net share repurchases. This performance underscores our ability to generate sound financial results even in a challenging year.

Worldwide sparkling beverage volume was up 1% for the year, led by brand Coca-Cola, and was even for the fourth quarter. Growth for the year was broad based across our sparkling portfolio, including Fanta and Sprite, enabling us to capture global core sparkling volume share for the eighth consecutive year. We continued to drive innovation in our portfolio, launching Coca-Cola Life, a naturally sweetened mid-calorie cola, in Argentina and Chile. We grew worldwide still beverage volume 5% for the full year and 6% for the fourth quarter, with growth across multiple beverage categories, including juices and juice drinks, ready-to-drink teas, packaged water, sports drinks and energy drinks.

OPERATING REVIEW

  Three Months Ended December 31, 2013
% Favorable / (Unfavorable)

Unit CaseVolume

 

NetRevenues

 

OperatingIncome

 

ComparableCurrencyNeutralOperatingIncome

 

ComparableCurrencyNeutralOperatingIncomeExcludingStructural

                 
Total Company 1   (4)   (4)   1   6
             
Eurasia & Africa 6   1   (11)   (2)
Europe 1   11   (11)   (6)
Latin America   (1)   (2)   13
North America (1)       (12)
Pacific 4   (10)   7   16
Bottling Investments (29)   (25)   (153)   (60)
 
  Three Months Ended December 31, 2013
% Favorable / (Unfavorable)

Concentrate Sales/ReportedVolume *

 

Price/Mix

  Currency  

StructuralChanges

 

NetRevenues

 

ComparableCurrencyNeutral NetRevenues

 

ComparableCurrencyNeutral NetRevenuesExcludingStructural

                         
Total Company 2   1   (2)   (5)   (4)   (1)   4
                     
Eurasia & Africa 6   2   (7)     1   9
Europe 1   7   3     11   8
Latin America 2   10   (11)   (2)   (1)   11
North America   1   (1)      
Pacific 3   (5)   (9)   1   (10)   (1)
Bottling Investments 8   1     (34)   (25)   (25)
 

*

Represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For our Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only and is computed on a reported basis.

 
  Year Ended December 31, 2013
% Favorable / (Unfavorable)

Unit CaseVolume

 

NetRevenues

 

OperatingIncome

 

ComparableCurrencyNeutralOperatingIncome

 

ComparableCurrencyNeutralOperatingIncomeExcludingStructural

                 
Total Company 2   (2)   (5)   4   6
             
Eurasia & Africa 7   2   1   9
Europe (1)   4   (3)   (1)
Latin America 1   2   1   12
North America     (6)   (3)
Pacific 3   (7)   (2)   6
Bottling Investments (17)   (14)   (18)  
 
  Year Ended December 31, 2013
% Favorable / (Unfavorable)

ConcentrateSales /ReportedVolume *

 

Price / Mix

  Currency  

StructuralChanges

 

NetRevenues

 

ComparableCurrencyNeutralNetRevenues

 

ComparableCurrencyNeutral NetRevenuesExcludingStructural

                         
Total Company 2   1   (2)   (3)   (2)    

3

                     
Eurasia & Africa 7   2   (7)     2   9
Europe (1)   5       4   4
Latin America 1   10   (8)   (1)   2   10
North America   1     (1)    
Pacific 5   (4)   (6)   (2)   (7)  
Bottling Investments 4   1   (1)   (18)   (14)   (13)
 

* Represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For our Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only.

 

Eurasia & Africa

  • Our Eurasia and Africa Group grew volume 6% in the quarter. All five of the group’s business units delivered volume growth for the quarter and full year, even with social unrest and challenging macroeconomic environments in certain markets. During the quarter, we gained volume share in NARTD beverages, with share gains in sparkling beverages, juices and juice drinks and sports drinks. Sparkling beverage volume grew mid single digits in the quarter, led by brand Coca-Cola, as we focused on driving executional capabilities in the marketplace and leveraging our marketing platforms including the Sochi Olympics and “Share a Coke”.
  • Reported operating income declined 11% in the quarter with comparable currency neutral operating income down 2% in the quarter, reflecting volume growth and positive price/mix offset by the timing of certain operating expenses. Reported operating income increased 1% for the full year. Comparable currency neutral operating income increased 9% for the full year, driven by revenue growth across most business units, partially offset by investments in our brands.

Europe

  • For the quarter, our Europe Group's volume grew 1% representing a sequential improvement versus the third quarter year-to-date results, with our sparkling beverage volume also growing 1% in the quarter. While there has been some improvement in our performance, we are still seeing ongoing macroeconomic uncertainty and weak consumer confidence impacting consumer spending, particularly in the southern region of Europe. We continue to focus on our share positions with the Europe Group maintaining volume share in NARTD beverages and gaining volume and value share in core sparkling beverages and sports drinks.
  • The consolidation of the innocent branded juice and smoothie business contributed significantly to the group’s price/mix and thus net revenues in both the quarter and the year. However, it contributed less meaningfully to the group’s operating income due to the higher cost of goods sold associated with a finished goods business and our level of investment as we continue to build and expand the business.
  • Reported operating income declined 11% in the quarter, with comparable currency neutral operating income down 6% in the quarter. The decline in comparable currency neutral operating income in the quarter was primarily due to cycling the impact of the timing of operating expenses in the prior year quarter. For the full year, reported operating income declined 3%. Comparable currency neutral operating income declined 1% for the full year, reflecting the decline in volume.

Latin America

  • Our Latin America Group's volume was even in the quarter with the group gaining volume share in NARTD beverages, resulting in the ninth consecutive year of share gains. However, sparkling beverage volume was down 3% as the category’s performance moderated primarily due to ongoing economic challenges, particularly in Mexico and Brazil, while we maintained volume share in sparkling beverages.
  • Reported operating income decreased 2% in the quarter, with comparable currency neutral operating income up 13%, reflecting favorable pricing across all business units in the group coupled with volume growth in the Latin Center and South Latin business units, partially offset by investments in our brands. Comparable currency neutral operating income increased 12% for the full year, reflecting volume growth and strong pricing for the group, partially offset by continued investments in the business, including investments related to the 2014 FIFA World Cup TM.

North America

  • We gained volume and value share in NARTD beverages in the fourth quarter, while our volume was down 1%. The overall NARTD industry in North America continued to be impacted by a challenging external environment. While our sparkling beverage volume declined 3% in the quarter, we outperformed the rest of the industry in both volume and value share, as we leveraged our occasion-brand-price-package-channel (OBPPC) strategy to provide increased consumer choice along with preferred price points. Still beverage volume grew 4% in the quarter, with balanced growth and volume and value share gains across every still beverage category, making this the 15 th consecutive quarter that our still beverage portfolio has either maintained or gained both volume and value share. Powerade delivered high single-digit growth in the quarter, gaining both volume and value share, with growth coming from both the base business and new Powerade Zero Drops.
  • Fourth quarter reported operating income was even. Comparable currency neutral operating income declined 12% in the quarter, reflecting softer volume trends, especially in sparkling beverages, and the timing of certain operating expenses. Full-year reported operating income decreased 6% with comparable currency neutral operating income down 3%, reflecting a challenging external environment and the impact of product and package mix.

Pacific

  • Our Pacific Group's volume grew 4% in the quarter, representing a sequential improvement versus the third quarter year-to-date results. Growth was broad based with 8% growth in India, 5% growth in China and 3% growth in Japan. Sparkling beverage volume growth was up low single digits in the quarter, led by brand Coca-Cola and Sprite, both up 2%. Still beverage volume grew high single digits in the quarter, with double-digit growth in packaged water and mid single-digit growth in teas and juices and juice drinks.
  • Reported operating income increased 7% in the quarter and comparable currency neutral operating income increased 16% in the quarter, reflecting volume growth, a shift in product and channel mix within certain markets, productivity initiatives and the tight control and timing of expenses. Reported operating income decreased 2% for the full year while comparable currency neutral operating income increased 6% for the full year, reflecting volume growth and the tight control of expenses.

Bottling Investments

  • Our Bottling Investments Group's (BIG) volume grew 7% in the quarter on a comparable basis, led by Germany, China and India, after adjusting for the net impact of structural changes, primarily the deconsolidation of the Philippine and Brazilian bottling operations in 2013. BIG volume, including the impact of structural changes, was down 29% in the quarter and down 17% for the full year.
  • Reported operating loss in the quarter increased $43 million, primarily reflecting the deconsolidation of Company-owned bottling operations. Comparable currency neutral operating income decreased 60% in the quarter due to the structural changes referenced above, but was partially offset by improved performance in a number of our markets and the benefit of an additional selling day in the quarter. Reported operating income for the full year declined 18%, and comparable currency neutral operating income was even for the full year, reflecting an increase in revenues resulting from volume growth and positive pricing in the majority of our markets, offset by the deconsolidation of Company-owned bottling operations in 2013.

FINANCIAL REVIEW

Summary of Fourth Quarter 2013 Financial Performance

Reported net revenues declined 4%. Excluding the impact of structural changes, comparable currency neutral net revenues grew 4% in the quarter, reflecting an increase in concentrate sales and positive price/mix. Structural changes that impacted net revenues were primarily the deconsolidation of bottling operations in the Philippines and Brazil.

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