Coca-Cola predicts recovery after ‘most challenging’ quarter

By Nivedita Balu

(Reuters) – Coca-Cola Co (N:KO) said on Tuesday demand for its beverages was improving after reporting a 28% slump in sales in the “most challenging” quarter of the year due to coronavirus-led closures of restaurants, theaters and sports venues.

Shares of the world’s largest soda maker rose about 4% as it also beat second-quarter profit estimates.

Coca-Cola generates a sizeable portion of its revenues by selling its soft drinks and concentrates to restaurants and theater operators, such as McDonald’s Corp (N:MCD) and AMC Entertainment Holdings Inc (N:AMC), but most of them had to close some or all of their operations due to the health crisis.

But as lockdowns eased, unit case volume trends, a key demand indicator, improved sequentially, from a decline of about 25% in April to a fall of about 10% in June. Volume trends was down mid-single digits globally for July to-date.

“We cannot discount there might be further waves of lockdowns, partial or full,” Chief Executive Officer James Quincey told analysts.

“Having said that, I am pretty confident that second quarter will ultimately prove to have been the most difficult and the most impacted quarter.”

Adjusted revenue fell to $7.18 billion in the three months ended June 26, while net income attributable to the beverage maker’s shareholders tumbled about 32% to $1.78 billion.

“With the bar adequately lowered for Q2 in recent weeks… the exit rate for volume trends for June/start to July was naturally a key focus for investors,” Jefferies (NYSE:JEF) analyst Kevin Grundy said.

Coca-Cola is expanding its digital presence through partnerships with third-party aggregators or by adding value bundles to restaurant menus as the pandemic prompts consumers to migrate to mobile delivery for groceries and prepared meals, Quincey said.

On a per share basis, Coca-Cola earned 42 cents, beating analysts’ estimate by 2 cents.