04/16/2014
Coke Takes $247 Million Loss from Venezuela Devaluation
MIAMI – Coca Cola’s first quarter 2014 earnings fell 4.2% from last year, with an 8% drop in net income and the company reporting $10.58 billion in revenue. Coca Cola attributed the lower results to global factors including a devaluation of Venezuela’s bolivar currency, lower volume in Europe, and the sale of bottling operations in Brazil. Still, the figure was above the $10.55 billion analysts had been guided to expect.
Coca-Cola said that it would take a charge of $247 million from Venezuela’s continuing currency woes.
“Based on recent changes to the Venezuelan currency exchange rate mechanisms, we changed the exchange rate we used to remeasure our Venezuelan subsidiary’s financial statements into U.S. dollars. As of March 28, 2014, we used the exchange rate determined by periodic auctions for U.S. dollars conducted under Venezuela’s Complementary System of Foreign Currency Administration (SICAD 1). As of March 28, 2014, the SICAD 1 rate was 10.8 bolivars to the U.S. dollar, compared to the official exchange rate of 6.3 bolivars to the U.S. dollar we previously used. During the first quarter, the Company recorded charges of $247 million related to the devaluation of the Venezuelan bolivar,” the company reported.
On Monday, security giant Brink’s wrote down over $400 million because of Venezuela. Brink’s, however, announced that it was using a third rate the beleaguered Venezuela government has set up, the SICAD 2 rate, which was 49 bolivars to the dollar yesterday – much higher than the SICAD 1 rate of 10.8 bolivars to the dollar Coke reports to now be using. Bottom line, more pain may be in the company’s future, if it is unable to persuade the Venezuelan government to exchange its bolivars at the much more favorable SICAD 1 rate. The company went on to warn that more pain in the future was indeed possible.
“Based on our current projections, we expect this change in exchange rates to have an unfavorable currency impact on our operating income for the remainder of 2014. Additionally, the Venezuelan government issued a new law on fair pricing establishing the maximum profit a business can earn in Venezuela. We are currently evaluating the impact the new law may have on our 2014 operating results.”
Venezuelan billionaire Gustavo Cisneros sold Venezuela's coke operations to Miami-based Panamerican Beverages Inc. (Panamco) for a mix of cash and shares in 1998, after he switched overnight from being rival Pepsi Cola's bottler in Venezuela. Mexico's Coca Cola Femsa -- the world's number 2 Coca Cola bottler, which is partly owned by Coca Cola -- paid Panamco stockholders $2.74 billion for the company in 2003.
source
Coke Takes $247 Million Loss from Venezuela Devaluation
MIAMI – Coca Cola’s first quarter 2014 earnings fell 4.2% from last year, with an 8% drop in net income and the company reporting $10.58 billion in revenue. Coca Cola attributed the lower results to global factors including a devaluation of Venezuela’s bolivar currency, lower volume in Europe, and the sale of bottling operations in Brazil. Still, the figure was above the $10.55 billion analysts had been guided to expect.Coca-Cola said that it would take a charge of $247 million from Venezuela’s continuing currency woes.
“Based on recent changes to the Venezuelan currency exchange rate mechanisms, we changed the exchange rate we used to remeasure our Venezuelan subsidiary’s financial statements into U.S. dollars. As of March 28, 2014, we used the exchange rate determined by periodic auctions for U.S. dollars conducted under Venezuela’s Complementary System of Foreign Currency Administration (SICAD 1). As of March 28, 2014, the SICAD 1 rate was 10.8 bolivars to the U.S. dollar, compared to the official exchange rate of 6.3 bolivars to the U.S. dollar we previously used. During the first quarter, the Company recorded charges of $247 million related to the devaluation of the Venezuelan bolivar,” the company reported.
On Monday, security giant Brink’s wrote down over $400 million because of Venezuela. Brink’s, however, announced that it was using a third rate the beleaguered Venezuela government has set up, the SICAD 2 rate, which was 49 bolivars to the dollar yesterday – much higher than the SICAD 1 rate of 10.8 bolivars to the dollar Coke reports to now be using. Bottom line, more pain may be in the company’s future, if it is unable to persuade the Venezuelan government to exchange its bolivars at the much more favorable SICAD 1 rate. The company went on to warn that more pain in the future was indeed possible.
“Based on our current projections, we expect this change in exchange rates to have an unfavorable currency impact on our operating income for the remainder of 2014. Additionally, the Venezuelan government issued a new law on fair pricing establishing the maximum profit a business can earn in Venezuela. We are currently evaluating the impact the new law may have on our 2014 operating results.”
Venezuelan billionaire Gustavo Cisneros sold Venezuela's coke operations to Miami-based Panamerican Beverages Inc. (Panamco) for a mix of cash and shares in 1998, after he switched overnight from being rival Pepsi Cola's bottler in Venezuela. Mexico's Coca Cola Femsa -- the world's number 2 Coca Cola bottler, which is partly owned by Coca Cola -- paid Panamco stockholders $2.74 billion for the company in 2003.
source
No comments:
Post a Comment