Coca-Cola warns of bigger hit on revenue from strong dollar

Wed Oct 21, 2015 10:57am EDT
 
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By Anjali Athavaley and Sruthi Ramakrishnan

(Reuters) - Coca-Cola Co (KO.N: Quote) reported a bigger-than-expected drop in quarterly sales due to a strong dollar, and the company said it expected the currency to hurt its full-year revenue more than previously anticipated.

The soda maker, which gets more than half of its total revenue from markets outside North America, said a strong dollar would lower its full-year revenue by 7 percentage points compared with 6 percentage points estimated earlier.

The dollar has risen 12 percent against a basket of major currencies in the past year.

Coke has called 2015 a transition year as it tries to cut costs and boost sales by raising prices and diversifying into beverages beyond soft drinks such as cold-pressed juices and energy drinks. The company has said that it is targeting $3 billion in annual cost savings by 2019.

It is also selling back its North American bottling operations to franchisees in a move to reduce low-margin assets on its balance sheet. The company said on Wednesday it signed letters of intent with three U.S. bottlers to expand distribution areas in seven states.

Overall, Coca-Cola's global sales volume rose 3 percent, driven by non-carbonated beverages such as ready-to-drink teas and juices.

In an interview, RBC Capital analyst Nik Modi called the growth healthy. He also noted that selling, general and administrative expenses, which declined 7 percent to $4.2 billion, were less than he expected, indicating that the company's cost cutting was having an impact earlier than anticipated.

Revenue from North America, its biggest market, rose 1 percent, helped by higher pricing and expanded distribution of Monster Beverage Corp's (MNST.O: Quote) energy drinks.   Continued...

 
Bottles of Coca-Cola are seen at the Safeway store in Wheaton, Maryland in this February 13, 2015 file photo.   REUTERS/Gary Cameron/Files