Coca-Cola tops sales expectations amid vaccine-led reopening

[ATLANTA] Coca-Cola's sales beat expectations in the first quarter as the soda maker said it saw early - though uneven - signs of recovery in demand, particularly in areas with stronger rates of vaccination against Covid-19.

The company also said it plans to sell a portion of the Coca-Cola Beverages Africa bottling business via an initial public offering.

Coke's organic revenue, which excludes the impact of currency or acquisitions, climbed 6 per cent in the quarter ended April 2, according to a statement on Monday. That topped the estimated 0.5 per cent growth analysts had been expecting, according to forecasts compiled by Bloomberg.

The results hint at a potential rebound as consumers worldwide emerge from more than a year of isolation, a process that is happening at different rates in different countries. The company is "encouraged by improvements in our business, especially in markets where vaccine availability is increasing and economies are opening up," chief executive officer James Quincey said in the statement.

The soda business is unlikely to see full recovery until people are back at restaurants and amusement parks worldwide, buying overpriced hot dogs and giant-sized soft drinks. The uneven reopening pace is showing up in the results: Recovery remains "asynchronous" around the world, the company said. Unit case volume was down 6 per cent in North America, but up 9 per cent in Asia Pacific. Globally, case unit volume was flat.

Coke shares rose 1 per cent to US$54.20 at 9.52 am in New York. The stock declined 2.1 per cent this year through Friday.

The company also announced plans to list Coca-Cola Beverages Africa as a publicly traded company within the next 18 months. "A standalone listing for CCBA will enable the bottler to build on its growth trajectory and access capital independently to meet the investment needs of the business, which is great for stakeholders across Africa," said Jacques Vermeulen, CEO of CCBA.

An IPO of Coke's stake could value the African business at about US$6 billion, Bloomberg News reported last month. The soft-drink giant, which owns 66.5 per cent of the bottling company, didn't specify how much of its stake it intends to sell.

Coke is grappling with the commodity inflation pressures that are affecting other manufacturers, chief financial officer John Murphy said in an interview.

While consumer prices may start to rise this quarter, the company is "well-hedged" to withstand much of the cost pressure in the near term, he said. "We think it's manageable this year; it's really a 2022 challenge."

Most relevant to the soda maker will be higher costs in plastic and aluminum, including can-supply challenges in the US, he said. That should abate in 2022, though, with more supply becoming available.

Coke is also seeing increases in high-fructose corn syrup and coffee. The company plans to manage those higher costs with supply-chain productivity and pricing, Mr Murphy said.

"Pricing decisions and hedging decisions are actually local decisions," he said. "We will be working closely with our bottling partners all around the world to come up with the optimal solutions that could happen starting in the second quarter." Coke reaffirmed its forecast for organic sales percentage growth of high single digits in 2021 and comparable earnings-per-share expansion of high single digits to low double digits. The company slightly trimmed its expectations for the impact of currency benefits on net revenue and comparable earnings.

BLOOMBERG

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