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Coca-Cola Predicts Recovery After "Most Challenging" Quarter

By Dave Simpson

Coca-Cola Co has said that demand for its beverages is improving after reporting a 28% slump in sales in the "most challenging" quarter of the year due to coronavirus-related closures of restaurants, cinemas and sports venues.

Shares of the world's largest soda maker rose approximately 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 cinema operators, such as McDonald's Corp and AMC Entertainment Holdings Inc, but most of them had to close some or all of their operations due to the health crisis.

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

"We cannot discount there might be further waves of lockdowns, partial or full," CEO 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 approximately 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 analyst Kevin Grundy said.

Expanding Its Digital Presence

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.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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