The Coca-Cola Company will maintain its majority stake in its African bottler Coca-Cola Beverages Africa for the foreseeable future.
With the change, Coca-Cola will begin presenting the financial statements of CCBA within its results from continuing operations in the second quarter of 2019. Coca-Cola previously announced its intention to refranchise CCBA, which is the largest bottler of Coca-Cola beverages in Africa, serving 12 countries.
The company has had discussions with a number of potential partners about the divestment of its controlling stake. Last year, the beverage giant reported a 10% decline in net revenues as it was hurt by the refranchising of its bottling operations.
“Coca-Cola Beverages Africa is a very important part of the Coca-Cola system, and we see great opportunities to create even more value,” said Coca-Cola President and Chief Operating Officer Brian Smith. “While we remain committed to the refranchising process, we believe it’s in the best interests of all involved for Coca-Cola to continue to hold and operate CCBA.”
In reclassifying CCBA’s results into continuing operations, Coca-Cola expects the following:
- The company will provide reclassified prior year financial information prior to the second quarter earnings release.
- Depreciation and amortization for CCBA will be reinstated, per accounting guidelines. Coca-Cola estimates depreciation and amortization expense for 2018 of approximately $400 million on a comparable basis.
- With the reclassification, Coca-Cola does not expect an impact on its 2019 organic revenue and comparable EPS growth guidance. The company expects an increase in its 2019 guidance for cash from operations of approximately $400 million and an increase in capital expenditures of approximately $400 million.
- CCBA’s results will be reported as part of the Bottling Investments Group segment.
CCBA was formed in 2016 through the combination of the African nonalcoholic ready-to-drink bottling interests of SABMiller, The Coca-Cola Company and Gutsche Family Investments. AB InBev later acquired SABMiller and reached an agreement to transition AB InBev’s 54.5% equity stake in CCBA to Coca-Cola.
In 2017, Coca-Cola Africa expanded its East African region with 7 additional countries in its latest reorganization of the 18 Southern and East Africa countries.
Swaziland and Lesotho became part of South Africa’s operations while Botswana, Zambia, Zimbabwe, Malawi, Namibia, St Helena and Angola became part of the East Africa block of markets which include Kenya, Tanzania, Uganda, Ethiopia, Mozambique, Djibouti, Somalia, Somaliland and Eritrea.