Coca-Cola(KO) - 2025 Q2 - Quarterly Results

Coca-Cola Reports Second Quarter 2025 Results Quarterly Performance Highlights Coca-Cola's Q2 2025 net revenues grew 1% to $12.5 billion, with operating income up 63%, though volume declined 1% and cash flow was negative due to a $6.1 billion payment Q2 2025 Key Financial Metrics | Metric | Value | Growth vs. Prior Year | | :--- | :--- | :--- | | Net Revenues | $12.5 billion | 1% | | Organic Revenues (Non-GAAP) | - | 5% | | Operating Income | - | 63% | | Comparable Currency Neutral Operating Income (Non-GAAP) | - | 15% | | Operating Margin | 34.1% | vs. 21.3% | | Comparable Operating Margin (Non-GAAP) | 34.7% | vs. 32.8% | | EPS | $0.88 | 58% | | Comparable EPS (Non-GAAP) | $0.87 | 4% | | Global Unit Case Volume | - | -1% | - Revenue performance was driven by a 6% growth in price/mix, which offset a 1% decline in concentrate sales[4] - Operating cash flow was negative $1.4 billion, primarily due to a $6.1 billion payment related to the fairlife acquisition. Excluding this payment, free cash flow (non-GAAP) was $3.9 billion[5] Company Updates Coca-Cola enhanced consumer connections via global marketing campaigns and leveraged RGM strategies to drive transaction growth with affordable single-serve options - The global relaunch of the "Share a Coke" campaign was activated with approximately 10 billion personalized bottles and cans in over 120 countries, contributing to single-serve transaction growth[6] - The "This is My Taste" campaign for Diet Coke in North America helped the brand achieve its fourth consecutive quarter of volume growth in the region[6] - Through its RGM strategy, the company added over 130 million transactions year-to-date in the juice drinks category by focusing on lower-cost single-serve options in markets like Latin America and India[6] Operating Review Three Months Ended June 27, 2025 Q2 consolidated unit case volume declined 1%, while price/mix grew 6% and comparable currency-neutral operating income increased 15%, with varied regional performance Q2 2025 Revenue and Volume Performance by Segment (% Change) | Segment | Concentrate Sales | Price/Mix | Reported Net Revenues | Organic Revenues | Unit Case Volume | | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated | (1) | 6 | 1 | 5 | (1) | | Europe, Middle East & Africa | 2 | 3 | 5 | 4 | 3 | | Latin America | (1) | 15 | (4) | 13 | (2) | | North America | 0 | 3 | 3 | 3 | (1) | | Asia Pacific | (5) | 10 | 3 | 5 | (3) | | Bottling Investments | (2) | 0 | (8) | (2) | (5) | Q2 2025 Operating Income Performance by Segment (% Change) | Segment | Reported Operating Income | Comparable Currency Neutral Operating Income | | :--- | :--- | :--- | | Consolidated | 63 | 15 | | Europe, Middle East & Africa | 3 | 7 | | Latin America | 4 | 38 | | North America | 18 | 10 | | Asia Pacific | 0 | 8 | | Bottling Investments | (39) | (35) | Consolidated Results (Q2) Q2 consolidated unit case volume declined 1%, driven by sparkling soft drinks and juice, while Coca-Cola Zero Sugar grew 14% and price/mix increased 6% - Sparkling soft drinks declined 1%, with Trademark Coca-Cola down 1% and sparkling flavors down 2%. However, Coca-Cola Zero Sugar grew 14%[12] - Juice, value-added dairy and plant-based beverages declined 4%, while the water, sports, coffee and tea category was flat[12][16] Europe, Middle East & Africa (Q2) EMEA Q2 unit case volume grew 3%, with price/mix also up 3%, leading to a 7% increase in comparable currency-neutral operating income and NARTD value share gains - Unit case volume grew 3%, and price/mix grew 3%[13] - Comparable currency neutral operating income (non-GAAP) grew 7%[13] Latin America (Q2) Latin America Q2 unit case volume declined 2%, but strong 15% price/mix growth drove a 38% increase in comparable currency-neutral operating income - Unit case volume declined 2%, but price/mix grew 15%[14] - Comparable currency neutral operating income (non-GAAP) grew by a strong 38%[14] North America (Q2) North America Q2 unit case volume declined 1%, while price/mix grew 3%, resulting in a 10% increase in comparable currency-neutral operating income and NARTD value share gains - Unit case volume declined 1%, while price/mix grew 3%[15][16] - Comparable currency neutral operating income (non-GAAP) grew 10%[16][17] Asia Pacific (Q2) Asia Pacific Q2 unit case volume declined 3%, but strong 10% price/mix growth led to an 8% increase in comparable currency-neutral operating income and NARTD value share gains - Unit case volume declined 3%, but price/mix grew 10%[18] - Comparable currency neutral operating income (non-GAAP) grew 8%[18] Bottling Investments (Q2) Bottling Investments Q2 unit case volume declined 5% due to India and refranchising, resulting in a 35% decrease in comparable currency-neutral operating income - Unit case volume declined 5%, largely due to declines in India and refranchising impacts[19][20] - Comparable currency neutral operating income (non-GAAP) declined 35%[20] Six Months Ended June 27, 2025 H1 2025 saw consolidated unit case volume grow 1%, with organic revenues up 5% and reported operating income increasing 66%, leading to 28% EPS growth H1 2025 Revenue and Volume Performance by Segment (% Change) | Segment | Concentrate Sales | Price/Mix | Reported Net Revenues | Organic Revenues | Unit Case Volume | | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated | 0 | 5 | 0 | 5 | 1 | | Europe, Middle East & Africa | 2 | 4 | 3 | 6 | 3 | | Latin America | (2) | 15 | (4) | 13 | (1) | | North America | (2) | 5 | 3 | 3 | (2) | | Asia Pacific | 1 | 5 | 0 | 6 | 1 | | Bottling Investments | (2) | 2 | (14) | 0 | (12) | H1 2025 Operating Income and EPS Performance (% Change) | Metric | Reported Growth | Comparable Currency Neutral Growth (Non-GAAP) | | :--- | :--- | :--- | | Consolidated Operating Income | 66 | 13 | | Europe, Middle East & Africa | 1 | 8 | | Latin America | 0 | 28 | | North America | 58 | 7 | | Asia Pacific | (2) | 8 | | Bottling Investments | (30) | (27) | | Consolidated EPS | 28 | 7 | Financial Outlook Full Year 2025 Guidance Full-year 2025 guidance maintains 5-6% organic revenue growth, but updates comparable net revenues and EPS for increased currency and structural headwinds, with free cash flow projected at $9.5 billion Updated Full Year 2025 Guidance | Metric | Guidance | Status | | :--- | :--- | :--- | | Organic Revenue Growth (Non-GAAP) | 5% to 6% | No Update | | Comparable Net Revenues (Non-GAAP) | 1-2% currency headwind, ~1% structural headwind | Updated | | Underlying Effective Tax Rate (Non-GAAP) | 20.8% | No Update | | Comparable Currency Neutral EPS Growth (Non-GAAP) | ~8% | Updated | | Comparable EPS Growth (Non-GAAP) | ~3% (vs. $2.88 in 2024) | Updated | | Free Cash Flow (Non-GAAP, ex. fairlife) | ~$9.5 billion | No Update | Third Quarter 2025 Considerations Q3 2025 guidance anticipates currency headwinds, with comparable net revenues facing a 1% impact and comparable EPS growth seeing a 5-6% headwind - Comparable net revenues (non-GAAP) are expected to include an approximate 1% currency headwind[29] - Comparable EPS (non-GAAP) percentage growth is expected to include a 5% to 6% currency headwind[29] Consolidated Financial Statements Consolidated Statements of Income Q2 2025 net operating revenues were $12.5 billion with $4.3 billion operating income, while H1 saw $23.7 billion in revenues and $7.1 billion net income Consolidated Statement of Income (Three Months Ended) | (In millions, except per share data) | June 27, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Net Operating Revenues | $12,535 | $12,363 | | Gross Profit | $7,821 | $7,551 | | Operating Income | $4,280 | $2,632 | | Net Income Attributable to Shareowners | $3,810 | $2,411 | | Diluted Net Income Per Share | $0.88 | $0.56 | Consolidated Statement of Income (Six Months Ended) | (In millions, except per share data) | June 27, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Net Operating Revenues | $23,664 | $23,663 | | Gross Profit | $14,787 | $14,616 | | Operating Income | $7,939 | $4,773 | | Net Income Attributable to Shareowners | $7,140 | $5,588 | | Diluted Net Income Per Share | $1.65 | $1.29 | Consolidated Balance Sheets As of June 27, 2025, total assets reached $104.3 billion, with total liabilities at $74.2 billion and total equity at $30.2 billion Balance Sheet Highlights (In millions) | Account | June 27, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $26,609 | $25,997 | | Total Assets | $104,333 | $100,549 | | Total Current Liabilities | $21,944 | $25,249 | | Long-term debt | $44,976 | $42,375 | | Total Equity | $30,182 | $26,372 | | Total Liabilities and Equity | $104,333 | $100,549 | Consolidated Statements of Cash Flows H1 2025 net cash used in operating activities was $1.4 billion, primarily due to a $6.1 billion fairlife payment, contrasting with prior year's positive cash flow Cash Flow Summary (Six Months Ended, in millions) | Activity | June 27, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $(1,391) | $4,113 | | Net Cash Provided by (Used in) Investing Activities | $(278) | $997 | | Net Cash Provided by (Used in) Financing Activities | $52 | $(532) | Reconciliation of GAAP and Non-GAAP Financial Measures Items Impacting Comparability Non-GAAP results for Q2 and H1 2025 were adjusted for asset impairment charges, refranchising gains, economic hedges, and unrealized gains/losses on securities, impacting comparability with prior periods - Q2 2025: Recorded a $40 million impairment for a Latin American equity investee and a $31 million impairment for a trademark in Latin America[56] - Q2 2025: Recognized a net gain of $102 million from the refranchising of bottling operations in India[60] - H1 2025: Recorded a net gain of $331 million from selling a portion of its ownership in Coca-Cola Europacific Partners plc[61] - H1 2024 (Prior Year): Recorded a significant $760 million impairment charge for the BODYARMOR trademark[58] Reconciliation of Operating Margin and Free Cash Flow Q2 2025 reported operating margin was 34.1%, with comparable operating margin at 34.7%, while H1 free cash flow was negative $2.1 billion, but $3.9 billion excluding the fairlife payment Operating Margin Reconciliation (Q2 2025) | Margin Type | Q2 2025 | Q2 2024 | Basis Point Change | | :--- | :--- | :--- | :--- | | Reported Operating Margin (GAAP) | 34.15% | 21.29% | 1,286 | | Comparable Operating Margin (Non-GAAP) | 34.72% | 32.79% | 193 | Free Cash Flow Reconciliation (Six Months Ended, in millions) | Line Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities (GAAP) | $(1,391) | $4,113 | | Free Cash Flow (Non-GAAP) | $(2,142) | $3,321 | | Plus: fairlife Contingent Consideration Payment | $6,069 | - | | Free Cash Flow Excl. fairlife Payment (Non-GAAP) | $3,927 | $3,321 | Company Information and Disclosures About The Coca-Cola Company The Coca-Cola Company is a global total beverage company operating in over 200 countries with a diverse portfolio of billion-dollar brands across various categories - The company sells products in more than 200 countries and territories[99] - Key brand portfolios include Coca-Cola, Sprite, Fanta (sparkling); Dasani, smartwater, BODYARMOR, Powerade, Costa (water, sports, coffee, tea); and Minute Maid, Simply, fairlife (juice, dairy, plant-based)[99] Forward-Looking Statements This section warns that forward-looking statements are subject to risks including economic conditions, competition, supply chain, consumer preferences, and tax matters, which could materially alter actual results - The report identifies key risks that could impact future results, including geopolitical conditions, competition, supply chain costs, consumer preference shifts, and tax law changes[101]