Atlanta - Coca-Cola shares fell the most in six years after third-quarter sales missed estimates and a $3 billion (R33bn) cost-cutting plan announced by chief executive Muhtar Kent failed to satisfy investors.
Sales fell to $11.98bn in the quarter from $12bn a year earlier, Coca-Cola said yesterday in a statement.
The world’s largest drinks maker is struggling with sluggish international growth and mounting concerns over obesity and artificial sweeteners. After criticism that he wasn’t responding quickly enough to the slump, Kent vowed today to reduce expenses by $3bn a year by 2019.
Shareholders may still be waiting for more dramatic action, especially since it’s unclear how much of those cost savings will wind up in investors’ pockets, said Ali Dibadj, a Sanford C Bernstein analyst.
“I wouldn’t call this capitulation by management as they continue to move too slowly for our tastes.” The drinks maker hasn’t indicated how much of the $3bn will be returned to shareholders, rather than “squandered” on marketing and advertising, he said.
The shares dropped as much as 6.6 percent to $40.45 in New York, marking the biggest intraday decline since October 2008. Earlier this month, the stock was trading in record territory. It had risen 4.8 percent this year through yesterday, compared with a 3 percent gain for the Standard & Poor’s 500 index.
Sales volume declined 1 percent in North America last quarter, while global volume rose 1 percent.
Third-quarter net income fell 14 percent to $2.1bn, or 48 cents a share, from $2.45bn, or 54c, a year earlier. Excluding some items, profit was 53c a share in the period, matching analysts’ estimates.
As part of the plan to streamline Coca-Cola, the majority of company-owned distribution territories in North America will be sold back to independent bottlers by the end of 2017, with most of the rest being refranchised by 2020. That’s an acceleration of a previously announced plan to sell the majority of the bottlers by 2020.
“We recognise that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment,” Kent said in yesterday’s statement.
The bottling effort addresses concerns raised by shareholders such as Wintergreen Advisers, an investment firm. On Monday, Wintergreen released a statement pushing for changes at Coca-Cola. It included a complaint that the company had taken too long to offload its bottling operations.
Wintergreen and analysts have called for deeper cuts at the company, which has a market value of about $190bn.
Kent had pledged in February to trim $1bn in costs by 2016. The company’s board also reined in its stock-compensation plan, which investors such as Warren Buffett had seen as excessive.
“We worry that bigger issues will continue to plague the company,” Vivien Azer, an analyst at Cowen Group, said this week in a note. “Macro weakness in emerging markets, particularly Latin America, concerns over diets, and currency headwinds, to name a few.” – Bloomberg