The global beverages giant Coca-Cola on Tuesday reported second quarter 2020 results that showed 33% decline in its earnings, though the company is optimistic on strategic actions to emerge stronger from the ongoing coronavirus pandemic.
The Coca-Cola system remained agile in the second quarter, with a focus on maintaining a safe
environment for employees while also providing necessary products and services to consumers, customers and communities during this unprecedented time, said the company.
“I’m proud of the people of the Coca-Cola system as we continue to adjust and accelerate our strategies in this fastchanging landscape,” said James Quincey, chairman and CEO of the Coca-Cola Company. “We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of ‘Beverages for Life’ and meet evolving consumer needs.”
Highlights of Quarterly Performance
• Revenues: Net revenues declined 28% to $7.2 billion. Organic revenues (non-GAAP) declined 26%. Revenue performance included a 22% decline in concentrate sales and a 4% decline in price/mix. The revenue declines were primarily driven by pressure in away-from-home channels, which represent approximately half of the company’s revenues.
• Margin: Operating margin, which included items impacting comparability, was 27.7% versus 29.9% in the prior year, while comparable operating margin (non-GAAP) was 30.0% versus 30.3% in the prior year. Operating margin contraction was primarily driven by top-line pressure and currency headwinds, partially offset by effective cost management.
• Earnings per share: EPS declined 32% to $0.41, and comparable EPS (non-GAAP) declined 33% to $0.42.
• Market share: The company lost value share in total nonalcoholic ready-to-drink (NARTD) beverages as an underlying share gain was more than offset by negative channel mix due to pressure in away-from-home channels, where the company has a strong share position.
• Cash flow: Year-to-date cash from operations was $2.8 billion, down 38%. Free cash flow (non-GAAP) was $2.3 billion, down 40%.
Since the company’s last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-to date was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels.
While the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company’s balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis.
Despite the high degree of uncertainty, the company said it is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality.
The Coca-Cola Foundation has partnered with the world’s largest humanitarian network,
the International Red Cross and Red Crescent Movement, and supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic.
In the first original ad during the pandemic for brand Coca-Cola, the company offered “The Great Meal” that features 13 real households in eight countries preparing and sharing home-cooked meals over an ice-cold Coca-Cola, bringing to life the comfort and authenticity of the brand’s connection to food.
However, the company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States.
In support of social justice, the Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.