Coca Cola restructures for future growth as profits fall

New Coca-Cola sweeted with cane sugar and Stevia leaf extract. Image Coca-Cola Twitter

Coca-Cola’s profit fell 55 per cent in the most recent quarter as it restructures with hopes of driving future growth.

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Yet the company said it expects its earnings to fall this year, and shares of Coca-Cola dropped more than 2 per cent Thursday.

The company, which makes Fanta, Sprite and Powerade, is in the process of selling off its bottling businesses to independent companies that will bottle its sodas and other drinks. Instead of bottling, Coca-Cola is focusing on marketing its brands and selling syrups and concentrates to the bottlers. The change means less revenue for Coca-Cola, but fewer costs.

“This is a pivotal time of change for our company,” James Quincey, Coca-Cola’s next CEO, told investors in a call Thursday.

Quincey, who is currently Coca-Cola’s No. 2 executive, is preparing to succeed CEO Muhtar Kent in May. Quincey has led the company’s drive to cut sugar in its drinks and wants to continue to do so as CEO. He said Thursday that the company will expand the Smartwater brand in Western Europe and offer more soda in smaller cans and bottles.

For the current year, the company expects earnings to fall 1 per cent to 4 per cent from 2016’s earnings of $1.91 per share. Analysts had expected 2017 earnings to rise 2 per cent to $1.95 per share, according to FactSet.

Coca-Cola earned $550 million, or 13 cents per share, for the three months ending Dec. 31. A year ago the Atlanta-based company earned $1.24 billion, or 28 cents per share.

Earnings, adjusted for one-time costs and asset impairment costs, came to 37 cents per share. That’s a penny better than what analysts polled by Zacks Investment Research anticipated.

Total revenue dropped to $9.41 billion from $10 billion, dragged down partly by a strong dollar, acquisitions and divestitures. Still, this managed to beat the $9.1 billion in revenue that analysts surveyed by Zacks were calling for.

Global sales volume dipped 1 per cent, with a 4 per cent drop in Latin America and 1 per cent increases in both North America and Europe. Sales of its sparkling beverages rose 1 per cent in North America, its biggest market.

Shares of Coca-Cola Co. fell 89 cents, or 2.1 per cent, to $41.13 in morning trading Thursday.
Rival PepsiCo Inc. will report its results next week.

SOURCE The Associated Press