Coca-Cola warns of coronavirus hit to second quarter

Coca-Cola has warned of a “material” impact to the second quarter after coronavirus and the introduction of increasingly stringent lockdown measures caused volumes to slump.

The US soft drinks giant said that up until the end of February, volume had been growing at 3% excluding China, putting it on track to achieve full-year targets.

But as the pandemic spread globally and lockdown measures were introduced, sales started to fall away. Around half of Coco-Cola’s sales come from so-called away-from-home channels, such as restaurants, pubs and cinemas.

Coca-Cola said: “Since the beginning of April, the company has experienced a volume decline globally of approximately 25%, with all of that decline coming in away-from-home channels.

“The ultimate impact on the second quarter and full year 2020 is unknown at this time, as it will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, the impact to the second quarter will be material.”

It also withdrew guidance for the full-year, arguing the financial and operating results “cannot be reasonably estimated” while the pandemic continues to evolve.

Cola-Cola saw first quarter net revenues dip 1% in the three months to 27 March, to $8.6bn, although that was still comfortably ahead of analyst forecasts. Organic revenues, which strip out the impact of acquisitions, sales and foreign currency, were flat.

Earnings per share jumped 65% to $0.64, while net income was $2.78bn, up on $1.68bn a year earlier.

At-home sales received a short-term boost in March, as various markets saw a rise in stockpiling following the coronavirus outbreak. Demand has since normalised, Coco-Cola said, but there had been a sharp increase in e-commerce.

William Ryder, equity analyst at Hargreaves Lansdown, said: “While a sales fall of this size is significant for any business, we think Coca-Cola should be able to weather the storm. Supply chain disruption seems to have been relatively minimal, and demand in the at home channel gives the group an avenue to keep sales going. Fundamentally, the brand is strong enough to carry the group to a comeback once this is all over.”