Coca-Cola reports first-quarter 2022 results

The Coca-Cola Company reported first quarter 2022 results, showing continued momentum in marketplace performance.

Summary:

Global unit case volume grew 8%
Net revenues grew 16%; organic revenues (non-GAAP) grew 18%
Operating income grew 25%; comparable currency neutral operating income (non-GAAP) grew 24%
Operating margin was 32.5% versus 30.2% in the prior year; comparable operating margin (non-GAAP) was 31.4% versus 31.0% in the prior year
EPS grew 23% to $0.64; comparable EPS (non-GAAP) grew 16% to $0.64

“We are pleased with our first quarter results as our company continues to execute effectively in a highly dynamic and uncertain operating environment,” said James Quincey, chairman and CEO of The Coca-Cola Company. “We remain true to our purpose and are staying close to consumers. We are confident in our full-year guidance, and we are well-equipped to win in all types of environments as we fuel strong topline momentum and create value for our stakeholders.”

Quarterly/Full-year performance

Revenues: Net revenues grew 16% to $10.5 billion, and organic revenues (non-GAAP) grew 18%. Revenue performance included 7% growth in price/mix and 11% growth in concentrate sales.
Margin: Operating margin, which included items impacting comparability, was 32.5% versus 30.2% in the prior year, while comparable operating margin (non-GAAP) was 31.4% versus 31.0% in the prior year.
Earnings per share: EPS grew 23% to $0.64, and comparable EPS (non-GAAP) grew 16% to $0.64. Comparable EPS (non-GAAP) performance included the impact of an 8-point currency headwind.
Market share: The company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages, which included share gains in both at-home and away-from-home channels.
Cash flow: Cash flow from operations was approximately $620 million, a decline of $1.0 billion versus the prior year, as strong business performance was more than offset by the impact of cycling the timing of working capital benefits in the prior year and higher 2021 annual incentives in the current year. Free cash flow (non-GAAP) was approximately $400 million, a decline of $1.0 billion versus the prior year.

Consolidated

Unit case volume grew 8%, with broad-based growth across all operating segments. Volume performance was driven by continued investments in the marketplace and a benefit from cycling the impact of the pandemic in the prior year. Developed markets as well as developing and emerging markets grew high single digits. Growth in developed markets was led by the United States, the United Kingdom and Mexico, while growth in developing and emerging markets was led by Brazil and India.

Category performance

Sparkling soft drinks grew 7%, driven by growth across all geographic operating segments, primarily Europe, Middle East and Africa and Latin America. Trademark Coca-Cola grew 6%, driven by growth across all geographic operating segments. Coca-Cola Zero Sugar grew 14%, driven by double-digit growth across all geographic operating segments. Sparkling flavors grew 7%, led by Europe, Middle East and Africa and Latin America.

Nutrition, juice, dairy and plant-based beverages grew 12%, led by Fairlife in the United States, Minute Maid Pulpy in China and Maaza in India.

Hydration, sports, coffee and tea grew 10%. Hydration grew 8%, led by strong growth in Latin America and Europe, Middle East and Africa. Sports drinks grew 22%, primarily driven by strong growth of BODYARMOR and Powerade. Tea grew 8%, led by growth in Brazil, Japan and Mexico. Coffee grew 27%, primarily driven by cycling the impact of Costa retail store closures in the United Kingdom in the prior year and continued expansion of Costa coffee across markets.

Price/mix grew 7%, driven by pricing actions in the marketplace along with favorable channel and package mix due to cycling the impact of the pandemic in the prior year. Price/mix further benefited by positive segment mix. Concentrate sales were 3 points ahead of unit case volume, largely due to the timing of concentrate shipments in the current quarter, partially offset by the impact of one less day in the quarter.

Operating income grew 25%, which included items impacting comparability and a 6-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 24%, driven by strong organic revenue (non-GAAP) growth across all operating segments, including a benefit from the timing of concentrate shipments in certain operating segments. This was partially offset by an increase in marketing investments versus the prior year.

North America

Unit case volume grew 5%. Growth was driven by further recovery in the fountain business as coronavirus related uncertainty continued to abate. Sparkling soft drinks and sports drinks led growth during the quarter.

Price/mix grew 11%, primarily driven by pricing actions in the marketplace, continued recovery in the fountain business and away-from-home channels, and strong growth in premium offerings. Price/mix growth included a benefit resulting from the timing of price increases in the prior year. Concentrate sales were 2 points behind unit case volume, primarily due to the impact of one less day in the quarter.

Operating income grew 33%, which included items impacting comparability. Comparable currency neutral operating income (non-GAAP) grew 19%, driven by strong organic revenue (non-GAAP) growth, partially offset by an increase in marketing investments versus the prior year.

The company gained value share in total NARTD beverages, driven by continued recovery in away-from-home channels along with strong performance in at-home channels across most categories.

Bottling investments

Unit case volume grew 8%, driven by strong growth in the key markets of India and the Philippines.

Price/mix grew 5%, driven by pricing actions across key markets.

Operating income grew 37%, which included items impacting comparability and a 7-point headwind from currency. Comparable currency neutral operating income (non-GAAP) grew 50%, driven by strong organic revenue (non-GAAP) growth.

Quarterly performance

On March 8, 2022, the company announced the suspension of its business in Russia as a result of the conflict in Ukraine. The approximate direct impacts of this are estimated to be as follows: