This summary is based on the fourth quarter fiscal 2007 earnings call conducted by The Coca-Cola Co. (KO) on February 13, 2008.
Management:
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Chairman of the Board, Chief Executive Officer: Neville Isdell
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President, Chief Operating Officer: Muhtar Kent
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Chief Financial Officer, Executive Vice President: Gary P. Fayard
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Vice President and Director of Investor Relations: Ann Taylor
Key Investors Issues
- Earnings rose 79% to $1.2 billion or 52 cents a share from $678 million or 29 cents a share in the prior year.
- Revenues increased 24% to $7.3 billion from $5.93 billion in 2006
- In December, the firm announced plans to begin a seamless transition of the CEO responsibilities to Kent Muhtar effective July 1, 2008.
Full Year Highlights:
- Earnings increased 19% to $5.98 billion or $2.57 a share.
- Unit case volume growth was 6%, in line with concentrate sales as revenue growth was 20% from $24.1 billion in the prior year to $28.9 billion.
- Cash from operations for the year increased 20% to $7.1 billion on strong underlying business performance and a decrease in working capital, while the firm repurchased $1.75 billion of stock and paid $3.1 billion in dividends to shareowners.
Fourth Quarter Highlights
Earnings increased 79% to $1.2 billion or 52 cents a share from $678 million or 29 cents a share in the prior year including 6 cents per share, primarily related to restructuring charges and some asset write-downs.
- Results were driven by strong volume growth, up 5% as Sparkling beverages grew 4%, and Still beverages increased 11%.
- The quarter was impacted by a strategic decision to de-emphasize low value water in several countries, such as China, which caused volume to round down to 5%.
- Net operating revenues increased 24% to $7.3 billion from $5.93 billion in the prior year, reflecting a 6% increase in concentrate sales, an 8% benefit from structural changes related to bottler acquisitions, an 8% currency benefit and a 2% favorable impact from pricing and mix.
Cost of goods sold increased 28% to $2.64 billion following increases in concentrate sales, currency and structural changes related to bottler acquisitions.
- Selling, general and administrative expenses rose 17% to $3 billion reflecting continued investments in marketing, increased costs to drive growth.
- The Company had other operating charges amounting to $125 million primarily related to restructuring charges and asset write-downs.
Strategic Insights and Accomplishments:
- The firm made commitments to strengthen the sparkling portfolio, to enhance position in still beverages, to improve capabilities in consumer marketing, customer leadership, and franchise leadership, and ensure that the business is sustainable.
- Specifically, the firm has strengthened its position in sparkling beverages with trademarks Coca-Cola, Sprite, and Fanta, all delivering solid unit case growth, and captured 72% of the global sparkling beverage industry growth for the year.
- Trademark Coca-Cola continued to be the key driver, with Coca-Cola Zero driving expansion of the category and gaining share, as Coca-Cola Zero is now in 55 countries.
Sparkling beverages are going to continue to be the backbone of the global growth in both developed and emerging markets.
- Through integrated marketing and connection of the brands to consumer passion points like the Olympics in 2008, American Idol, and Super Bowl, the firm is uniquely positioned to capture the highly profitable sparkling beverage opportunity.
- It has also enhanced and expanded the still beverage business through organic growth and targeted bolt-on acquisitions, following the acquisition of Glaceau and its vitamin water brand.
- Trademark Minute Maid increased unit cases 5%, driven by the expansion of Minute Maid Pulpy in China and other emerging markets and in sports drinks and water, the firm continues to look for the highest value opportunities and drive innovation through functional enhancements.
Progress in consumer marketing and consumer leadership sparked new interest in the expanding portfolio among shoppers, retail customers, and bottling partners.
- The Coke side of life, happiness factory the movie, and other award-winning marketing programs have reignited the energy and the optimism right at the core of the brands, and bottling partners are investing behind the business.
Social Responsibility:
- In the commitments center around four key touch stones: water, the firm announced the new global partnership with the World Wildlife Fund to conserve seven of the world’s most important watersheds and to become water neutral in all beverage production processes.
- In Packaging, the firm announced a significant expansion of U.S. recycling efforts by investing $60 million, including the building of the world’s largest PET bottle to bottle recycling plant in South Carolina.
- It also announced the long-term target to recycle or reuse 100% of aluminum beverage cans which are sold in the U.S., which builds on the previously announced goal to recycle or reuse 100% of PET plastic bottles.
- With respect to the climate, the firm is intensifying efforts to reduce carbon emissions and at the 2008 Summer Olympic Games, it will buy more than 5,000 climate friendly coolers and vending machines.
