Profits of Coca-Cola took a huge 55% hit in the fourth fiscal quarter due to a combination of issues in Venezuela and weakened foreign exchange rates. Even with this, the ultimate results were higher than what analysts anticipated.
During the fourth quarter, the company reported $10.87 billion in revenue, which was 2% less that reported the same time in 2014. However, at the rate, company revenue was higher than the $10.77 expected. Regarding Coca-Cola’s net income, it dropped to $770 million, a dramatic 55% decline from last year’s numbers. Based on this, earnings per share were $0.17, a big difference from the $0.38 in 2014.
According to a company spokesperson, declining factors were the ongoing woes associated with Venezuela and a headwind of 10-points specific to foreign exchange rates. In 2014’s first quarter, the company took a $247 million charge in connection with the Venezuelan bolivar losing value. In addition, a write-down on sales receivables for a partner who bottles product in Venezuela and redefined asset value from a subsidiary also caused the $393 million net change.
In looking at revenue on a full year basis at year-end 2014, Coca-Cola reported $46 million and for net income, $7.1 billion, down 2% and 17% respectively from 2013. Dropping from $1.90 to $1.60 per share was full-year earnings. Operations in Venezuela also had a significant impact on the company’s full-year earnings, with a spokesperson stating that for the year, related charges were $661 million.
Muhtar Kent, chairman and CEO of Coca-Cola said the plan for growth that was initially announced last October is still in place and the company is making good progress. As such, Coca-Cola will continue to stay focused on increasing growth although 2015 will be a year of transition since benefit initiatives that were announced will take some time to materialize, this combined with a very difficult macroeconomic environment.
Even so, the company is confident that all the appropriate strategies are firmly in place and that the initiatives are being embraced by bottling partners who are excited about the different opportunities for the future.
For this year, the company believes there will be some improvement in revenue growth for sales and that for the currency neutral earnings per share, mid-single digit growth is predicted.
However, negative impact as the result of foreign exchange rates will continue to be seen but in looking at spot rates, cycling of rates from the previous year, and current hedge positions, currency on net revenues will be hit with a 5 point headwind and for profit prior to taxes for the full year, a 7 to 8 point headwind.
After Coca-Cola made released information, shares climbed over 4%, with stock being up 3.9%. Then for year-over-year numbers, the company is currently 11.2% higher.