The Coca Cola Company Financial Analysis.

Introduction.

The coca-cola company is a multinational American Corporation that Specializes on the manufacture and distribution of non-alcoholic syrups and beverage concentrates. Its headquarters is in Atlanta, Georgia. Its flagship product Coca-Cola was invented in the year 1886 by John Stith Pemberton, a pharmacist by profession. The brand name and the Coca-Cola formula was sold and bought by Asa Griggs Candler in the year 1889. He later incorporated and registered it under the name The Coca-Cola Company in 1892.

Coca-Cola has over 500 different brands in over 200 countries worldwide. On a single day Coca-Cola serves over 1.7 Billion customers. Coca-Cola operates a franchised system of distribution where it only produces the syrup concentrate and sells to the independent bottlers throughout the world. Currently Coca-Cola owns anchor bottler in the USA.

Muhtar Kent is the chief executive and also the chairman of The Coca-Cola Company. Its listed in the New York Stock Exchange (NSE) under the initials KO and is part of the S&P 500 index the Russell 1000/growth stock index.

Coca-Cola Company has over the years acquired many companies. In 1960 it acquired Minute Maid, between the years 1993, 1995 and 2001, it acquired the cola brand from India, Barq’s and the brand Odwalla that makes fruit juices and bars respectively. In 2007 it acquired the Fuze beverage and Castanea Partners.

The greatest consumption of The Coca-cola company product is the USA at 42% of its total sales, while Asia and Latin America account for 37% while the rest of the world share the remaining 21%.

Discuss the North American market for the Coca-Cola Company and the impact to volume growth or declines for the period.

Following the acquisition of CCE, a North American based company (Coca-Cola Enterprise) in the year 2010, the sales increased tremendously in the North American segment. The integration of CCE was aimed at combining it with other food oriented businesses; these were the Minute Maid and the Odwallo juice business and the complex Company-owned bottling and packaging operations in Philadelphia and Pennsylvania. These operations were unified and renamed Coca-Cola refreshments or CCR.

The Total net operating revenue increased by 83.58% from $11205 million in 2010 to $ 20571 million in 2011. The Total net operating revenue also increased by 5.4% in 2012 from $20571 million in 2011 to $21680 million in 2012. The capital expenditures were $711 million, $1364 million and $1447 million in the years 2010, 2011, 2012 respectively.(Vance, 2003).

The identifiable operating assets were $32793, $33422 and 34114 in the years 2010, 2011 and 2012. These represented a steady increase in growth of the identifiable asset of 1.9% in 2011 and 2.1% in 2012. The investment in the North American segment were minimal as the acquired assets under the CCR umbrella were enormous the actual investment made were $57 million compared to $291 million in Eurasia and Africa in 2010, a difference of about 410.5%. These means that in the year 2010 the investments in Eurasia and Africa were slightly over four times more than the investments in North America. In the year 2011 the investments in North America reduced further by 54% to stand at $26 million while investments to Eurasia and Africa also reduced by 2.4% to stand at $284 million. In the year 2012 the investment to North America was $39 million, an increase of 50% while investment to Eurasia and Africa increased to $1155 million which resulted to a total increase of 206.7%.

Discuss the drivers of profitability during the quarter at the Coca-Cola Company and the likely long-term impact of these drives on profits.

The Coca-Coca company first quarter results for the year 2013 represented an overall 4% growth in the world market. These represented a growth of 5% in the American market and 3% in the remaining external market. The drivers of profitability were the Global sparkling beverage which grew by 3% and the Coca-Cola brand that also grew with a similar margin. The revenues in the first quarter of 2013 reduced by 1% due to the impact of structural and investment activities. The operating income also reduced by 4%. (Khan, 1993).

The other drivers of profitability were the nonalcoholic ready to drink beverages (NARTD) whose consumption grew by 3% in the first quarter of 2013 and the immediate consumption of sparkling also grew by 2% in the same period. The Fanta brand sales volume grew by 6% while Sprite also grew by 5%. These growths were driven by the constant innovation in packaging, sweeteners and aggressive activation of international marketing campaigns.

The worldwide still beverage sales volume grew by 6% in the first quarter, which also included the ready to drink tea, juices, packaged water, sports and energy drinks.

The ready to drink tea brands made a strong impact in the market with its leading brands such as Gold peak and honest Tea in the American market. Ayataka green tea also made a mark in the Japanese market and also the Fuze Tea which expanded globally.

The juices and the juice drinks sales volume grew by 9% globally also the energy drinks grew by the same margin. Packaged water grew by 1% in the international market. The ILOHAS single service water and the Ayataka premium tea in Japan grew by 22% and 13% respectively. All these innovations are targeted at capturing the global market.

Discuss the Earnings per share results for the quarter in comparison to historic results and long term growth targets.

The earnings per share (EPS) was $0.39 for the first quarter of 2013 which is 13% below the last earning per share of the last quarter. The basic EPS for the year 2012 was $2 which was an improvement of 6% from the previous year, 2011 that was $1.85 which compared to the year 2010 represented a decrease of 26% as the basic EPS for 2010 was $2.53. (Ehrhardt and Brigham 2008).

The diluted EPS for the year 2012 was $1.97 which represented an increase of 6% compared to 2011 Diluted EPS of $1.85. There was a decrease in Diluted EPS of 27% in 2011 compared to 2010 which was $2.53.

The long term growth plans targets increase in authorized shares of common stock from the current 5.6 billion to 11.2 billion and also to effect 2:1 (two for one) stock split among the current share holders.

Discuss the emerging markets for the Coca-Cola Company and the likely future impact on earnings per share.

To diversify and consolidate its dominance in the beverage and syrup global market The Coca-Cola Company embarked on acquisitions and expansion programs in emerging markets. In the year 2012 a total of $1.535 billion had been spent on company’s acquisitions and investment in emerging markets. These were related to the Aujan Industries Company J.S.C one of the largest beverage company in Middle East, the Mikumi Coca-Cola Bottling plant in Japan. The other ones were in Cambodia, Guatemala and even Vietnam. These acquisitions had a positive effect on the EPS first quarter results of 2013 which were affected by other factors related to structural changes and the international currency fluctuations in the monetary market. These acquisitions target the growth in the global market and also the main North American market which account for over 42% of the Coca-Cola sales with its leading brand Coke taking 78% of its total sales worldwide.

Reference.

Drucker, F. (1999) Management Challenges of the 21st Century. New York: Harper Business.

Ehrhardt, M., Brigham, E. (2008). Corporate Finance: A Focused Approach (3rd Ed.). p. 131.

Garrison, H., Noreen, E., Brewer, C. (2009) Managerial Accounting. McGraw-Hill Irwin.

Khan, M. (1993). Theory & Problems in Financial Management. (Boston: McGraw Hill

Higher Education.

Mocciaro A., Picone P. & Minà (2012). A Bringing Strategy Back into Financial Systems of Performance Measurement: Integrating EVA and PBC, .Business System Review, Vol 1, Issue 1. Pp.85.

Vance, D. (2003). Financial analysis and decision making: tools and techniques to solve

financial problems and make effective business decisions. New York: McGraw-Hill.