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Sep 10th, 2012
THE COCA COLA COMPANY
NYSE: KO
Continuing Coverage: Company growth successfully focused in emerging markets
Investment Rating: Market Outperform
Stock Value
2008 2009 2010 2011
Net Income (in millions of USD) 5,807 6,824 11,809 8,572
Average shares outstanding (in millions) 2,315 2,314 2,308 2,284
Net income per share (in USD) 2.51 2.95 5.12 3.75
Valuation (in millions of dollars)
2012 2013 2014 2015 2016 2017 2018 2019 2020
2021
Free cash flow 5,907 6,453 7,134 7,722 8,354 9,034 9,766 10,552 11,399 321,424
NPV USD 235,727
WACC Free risk rate 1.89% Total Liabilities (in millions USD) 48,053
Market prime 6.01% Equity (EQT) 31,921
Country risk premium 0.00% Leveraged Beta 1.56
Shareholder’s return 11.26% Industry Beta 0.73
WACC 5.98%
Company Quick View
Location: Atlanta, United States (Principal)
Industry: Beverages
Description: Production, bottling, distribution and commercialization of non-
alcoholic beverages
Key Products and Services: Coca-Cola, Diet Coke, Fanta and Sprite
Company Web Site: www.thecoca-colacompany.com
Analysts:
Katia Corbacho Alcocer
Natalia Mejia Ninacondor
David Sáenz Pantoja
Katerine Salinas Cabezas
Assessor: Juan O’brien
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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STOCK PRICE
PERFORMANCE
Figure 1:
5-year Stock Price
Performance
Source: Yahoo Finance
INVESTMENT
SUMMARY
Upon determining the Coca Cola Company’s (hereinafter KO) value, by
using the discounted-cash-flow valuation method, we give KO a Market
Outperform rating with a target price of US$93 (versus average market
price of US$79 for the period between January and June 2012). As a
multinational company, currently is focused in ensuring future growth
especially in emerging markets.
Due to successful performance, KO has been considered as the world's
leading into the industry of non-alcoholic beverage concentrates and
syrups. KO produces more than 230 beverage brands and owes most of
all the world's top five soft drink brands, including Coke, diet Coke,
Fanta, and Sprite.
Up to date Coca-cola continue being a leader in the market of beverages
with 41.9% participation against 28.5% of its nearest competitor (Pepsi).
Talking about branches Coca-cola, is also first with Coke, Diet Coke
with 17% and 9.6% respectively, while Pepsi has a 9.2% of participation.
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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INVESTMENT
THESIS
Investment in Asia
Investment in Latin and
Centro America
KO has a defined strategy mainly focused in developing its investments
in emerging markets. In this sense, KO’s future plans are directed to
increase sales in Asia, market that is considered to be one of the main
growth drivers for KO’s future.
Malaysia
During 2010 KO started a 5-years life investment of about US$302
millions in Malaysia. Up to June 2011, about a third of the total planned
investment amount was already spent setting-up a bottling plant, while
the remaining amount is supposed to be used in sales, marketing and
production innovation in the following five years.
The Indian Republic
Indian market is considered as one of the ten-top markets for KO’s
abroad investments. Therefore, in June 2012, KO announced an increase
of US$3 billions in the India’s previously committed investment (in
addition to the US$2 billion already announced in November 2011), to
be spent over the next eight years in order to expand its business. It is
expected that sales in India keep growing as occurred in the last year
(about 20% in comparison with 2010 results).
China
In August 2011, KO announced a US$5 billion investment in China
starting in year 2012, and for a period of three years. Such investment
mainly will be focused in the construction of new bottling plants,
expansion of existing facilities, development of new drinks, etc.
Brazil
Brazil is the KO’s fourth-largest consumer market in the world.
Therefore, in March 2012, KO announced a planned investment of about
US$ 7.8 billion in Brazil starting 2012 and for the following 4 years.
Such investment is planned to be spent mainly in the development of a
new beverage bottling plant. The Brazilian market became attractive due
to the growth potential in the following years, mainly because Brazil will
host the World Cup and Olympic Games, with expected higher earnings
for KO as one of the main sponsor of both events.
Mexico
As part of KO’s strategy of investment in emerging markets, in march
2012, KO announced its plans to invest more than $1 billion during 2012
as part of a $5 billion, five-year investment plan. In Mexico is located
the Latin America's two largest bottlers of Coca-Cola brand products,
Coca-Cola Femsa SAB and Arca Continental SAB.
VALUATION In order to determine KO’s target price of US$93 per stock share, we
used the discounted-cash-flow valuation method as described below.
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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Valuation method process
We defined as prior consideration, a 10-year period to forecast operating
free cash flows. In parallel we determined a weighted average cost of
capital (WACC) of 5.98%. The WACC determined includes a cost of
debt of 3.28% and a cost of equity of 11.26%. Other assumptions we
included in this valuation were a 1.89% free risk rate, a market premium
of 6.01%, and an industry Beta of 0.73. As a result, we calculated the
KO’s equity value to be approximately $212 billion. This value divided
by the current outstanding shares left us with a share price of $93.
INDUSTRY
ANALYSIS
Industry Drivers
Regulations
Bargaining Power of
Suppliers
Bargaining Power of
Customers
Water is the main ingredient used in the beverage industry (about 90% of
any product composition). Sugar is another principal ingredient in
production of beverages. In this sense, refined sugar is used in countries
as Mexico, and Europe, while in some countries like United States and
Argentina, Coca-cola is sweeten with corn syrup.
Due to the fact that corn syrup is one of the principal ingredients of KO’s
products, therefore any change or variation in the international price of
sugar (consider a commodity) would affect considerably the costs
structure in the manufacture of its products.
According to the California law, known as proposition 65, which
indicate that all products should contain some warnings when the
products are sold, if the products contain any substance that could cause
cancer or birth defects.
There is also a law that determines a tax fee over the selling, marketing
and using of some of the non-refillable beverage containers.
Almost 60% of the production costs of the beverages is represented for
sweeten, bottled and essence. The sugar is a product that is imported and
is bought locally, so the sugar is obtained from mixed sources, and
because sugar is in the stock market its price varies with the international
prices. If the sugar is acquired locally, the suppliers would have a little
bit more bargaining power upon the sell price. In the market there are a
lot of bottling companies, therefore the negotiation power that those
companies could cause is reduced.
The beverage sector has a wide range of customers (bottlers and large
distribution companies) as well as direct consumers (located in different
socioeconomic levels), that's why the customers have a low level of
negotiation. It is important to mention that KO provides both its
customers as well as direct consumers with a wide variety of options that
covers their needs and life style choices.
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
5
Availability of Substitutes
Competitive Rivalry
The carbonate beverages, have several substitutes that in these last years
were shown in the market, among the principal ones we have the fruits
beverages and instant beverages. Despite the market has pushed the food
and beverages with natural content, these are in general more expensive
than the gas beverages.
The principal competence of KO is Pepsi Co., both companies occupied
almost 71% of the market. Major explanation of the strong rivalry
between Coca and Pepsi, and the difference is basically variety of their
products, as well as the customers’ target each company is focused on.
Source: http://www.beverage-digest.com/pdf/top-10_2012.pdf
COMPANY
DESCRIPTION
History
A hundred and 26 years ago, a 54 year old pharmacist named John Stith
Pemberton, created the famous formula. At the beginning the beverage
was used as a remedy to cure headache and to dissimulate nauseas. Then
Mr. Pemberton’s accountant Frank Robinson named it Coca-cola and he
also was the designer of the logo. Finally Griggs Candler acquired the
company and he was the first president.
In 1895 Candler has built plants in Chicago, Dallas and Los Angeles. In
1894 Joseph A. Biednham was the first to put the beverage in bottles,
four years later Benjamin F. Thomas and Joseph B. Whitehead, secured
the beverage rights for bottled and sell it for 1 dollar.
The company decided to create a distinctive bottle to assure that the
buyers were really acquiring a Coca-cola, then in 1916 began the
manufacture of the famous bottle after a contest proposed for the bottle
companies and the Coca-cola company.
In 1919 the Candler family sold all the company stocks, and in 1928
Coca-cola was introduced to the Olympic games, back then Coca-cola
traveled with the American team to the Amsterdan Olympics.
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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Products
Key latest development
After 70 years of success, the company decided that it was time to
expand to new flavors, so they created Fanta (developed in 1940 and
introduced in 1950); Sprite (1961), TAB (1963) and Fresca (1966). In
the 90s the long association of the company was Strengthened with the
support of the Olympic games, the world cup of football, rugby world
cup, and the national basket association. New beverages were introduced
to the company, including Powerade, Qoo (fruit beverage for children)
and Dasani. The company also expands itself with acquisitions as Limca
in India Barq's beer and Inca Kola in Perú.
Up to date Coca-cola continue being a lider in the market of beverages
with 41.9% participation against 28.5% of its nearest competitor (Pepsi).
Talking about branches Coca-cola, is also first with Coke, Diet Coke
with 17% and 9.6% respectively, while Pepsi has a 9.2% of participation.
Source: http://www.thecoca-colacompany.com/citizenship/portfolio.html
Product And Marketing Agreement between Dunkin' Brands Group
Inc and KO
As per the “Product and Marketing Agreement” signed in April 2012,
from August 2012 going forward, more than 9,000 Dunkin Donuts and
Baskin Robbins (chains owned by Dunkin’ Brands Group Inc) will
eventually start with exclusive commercialization of KO products (such
as soft drinks, as well as juices, energy drinks, etc). Such agreement also
includes both companies’ brands marketing campaigns.
PEER ANALYSIS
The competence in Coca-cola is centralized in the beverage segment, and
this in particular in the non-alcoholic products is quite competitive. The
competence that the company has is regional and worldwide. Among the
principal companies that compete direct and in an indirect way with
Coca-cola we could mention Pepsico, Dr Pepper, Nestle, etc. Among the
products that compete in these companies we have, gas beverages,
waters, flavor waters, juices, nectars, etc. Bellow is table showing the
principal companies with the principal key finance indicators.
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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Pepsico Inc.(PEP)
Dr Pepper Snapple
Group Inc.(DPS)
Source: Yahoo finance
Pepsico Inc. is a company created in early 1890. The company produce,
distribute and sell gas and no gas products, sweet and salad appetizers.
Among its principal products besides Pepsi, we can mention Quaker,
Frito Lay, Gatorade and Tropicana, Pepsi is the principal competence of
Coca-cola.
Dr. Pepper was created in 1880. The company does not have bottling
companies, that's why they generally hired the services of independents
bottling companies that work with Coca-cola and Pepsi. The beverage
was first sold in USA, and then they expand to Europe, Asia, Canada,
Mexico, Australia, New Zeland and South America.
MANAGEMENT
PERFORMANCE
AND BACKGROUND
Directory of Coca-cola_______________________________________
President (CEO) Sr. Muhtar Kent
Vice President (CFO) Sr. Gary P. Fayard
Vice President y controller Sra. Kathy N. Waller
Directors Sr. Herbert A. Allen
Sr. Alexis M. Herman
Sr. Ronald W. Allen
Sr. Donald R. Keough
Sr. Howard G. Buffet
Sr. Robert A. Kotick
Sra. Maria Elena Lagomasino
Sr. Peter V. Ueberroth
Sr. Donald F. MacHenry
Sr. Jacob Wallenberg
Sr. Sam Nunn
Sr. James B. Williams
Sr. James D. Robinson III
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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General Managers__________________________________________
Harry L. Anderson Senior vicepresident, global business and
Technologies services.
Ahmet Z. Bozer President of Asia and Africa
Steven A. Cahillane President and CEO of Coca-cola
Refreshments, which is the company
bottling and customer services
Allexander B. Cummings Jr. Executive vicepresident and chief
administrative office
J. Allexander M. Douglas Jr. President of the North America group
Ceree Eberly Senior vicepresident and personal chief
Gary P. Fallard Executive vicepresident and CFO
Irial Finan Executive vicepresident and president of
Bottling and logistic
Bernhard Goepelt Senior vicepresident, general counselor
And legal chief counselor
Glenn G. Jordan President of the pacific group
Geoffrey J. Kelly General counselor
Muhtar Kent President of the general board of directors
and CEO
Dominique Reiniche President of the Europe group
José Octavio Reyes President of the Latino América group
Joseph V. Tripodi Executive vicepresident and marketing
chief
Clyde C. Tuggle Senior vicepresident and public relations
Jerry S. Wilson Senior vicepresident and customer chief
Guy Wollaert Senior vicepresident and technical office
chief
SHAREHOLDER
ANALYSIS
As of December 31, 2011, about 32% of KO’s outstanding shares were
owned by a total of 40 major institutional and mutual fund owners.
Individual investors, minor insurance companies, and minor pension
funds held the remaining 68% of shares. Such distribution is summarized
in the following chart:
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
9
Source: Yahoo Finance
RISK ANALYSIS
Operational Risks
KO is subject to several internal and external risks, including
operational, regulatory, and financial risks, as discussed below.
Dependence on Bottling Partners
KO’s core business refers to commercialization of carbonated syrup and
concentrates to independent bottlers. Therefore, one of KO’s main goals
is to ensure that relationships between KO and its major customers are
well maintained, by providing them diverse incentives including not only
good prices, but also competitive marketing support. If such incentives
are not appropriately managed, KO business may suffer negative effects;
because these companies’ business include also production of own
beverages as well as distribution of products from other beverage
companies (KO’s competitors). Such dependence on these bottling
partners is one of KO weakness.
Lack of raw, supply and packaging materials risk
Most of KO’s products, as well as its bottling partners’, use various
ingredients, such as sucrose, aspartame, fruit concentrates, etc, as well as
PET for bottles and aluminum for cans. KO’s main risk would be related
to variation of prices for such materials, which depends on market
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
10
Financial Risks
conditions. Such increases may not always be recovered by increasing
prices of finished products, mainly because
Liquidity risk
Per definition, the current ratio and the quick ratio indicate companies’
liquidity level. In this sense, current ratio evaluates companies’ ability to
pay in a timely manner the integrity of their short-term liabilities; in the
other hand, quick ratio measures the portion of liquid assets that can be
used by companies to pay all their short-term liabilities. As shown in the
chart below, KO’s current ratio for the first 2012 quarter is greater that
the ratio shown by its peer, but pretty similar to the industry average
ratio. Liquidity Ratios
Company Current
Ratio Quick Ratio
The Coca Cola Company (KO) 1.1x 0.8x
Dr Pepper Snapple Group Inc (DPS) 0.9x 0.6x
Pepsico Inc (PEP) 1.0x 0.6x
Source: Bloomberg
Currency fluctuation risk Due to latest strong fluctuation of the U.S. Dollars (USD), and because
KO is a Company based in United States, the lost and recovery of USD
value directly influences in the determination of its earnings. The reason
why USD fluctuation affects KO’s financial performance mainly refers
to the fact that about 75% of the total KO’s operating income proceeds
from foreign operations. Therefore, as the USD strength increases, it
influences in the weakness of foreign currencies, and also affects
earnings proceeding from good sold in foreign markets, because the
worth of such goods decreases in the same proportion than the USD
becomes stronger.
Financial Instruments exposure risks
In order to cover from previous Currency Fluctuation Risk, KO hedges
most of the exposure to foreign currencies, in order to avoid negative
effects in earning from their fluctuations. In this sense, because of
remain weaknesses of some of the principal financial institutions, as a
result of the previous financial crisis, KO’s future financial instruments
transactions may be affected, mainly due to the uncertainty of such
institutions solvency.
Interest rate risk
One of KO’s financial policies refers to maintain a high level of
financing debt, based on the fact that it would decrease KO’s cost of
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
11
capital, and therefore positively affect to the shareholder’s equity return.
Due to this, KO is exposed to positive changes of Interest Rates, which is
often covered by financial instruments, however they would not ensure
to KO’s the fully coverage of such interest rate risk. In addition, KO
financial risk management also can be affected by the credit rating
agency’s evaluation, which is expected by KO management to remain
positive as in the latest years.
FINANCIAL
PERFORMANCE
AND
PROJECTIONS
Operational Assumptions
In the process of analyzing KO, we made several assumptions based on
public information about the Company’s future operational, investing,
and financing decisions. These assumptions led us to a target price of
US$93.
One of the main assumptions necessary to determine KO’s cash flow is
the estimated growth for annual revenues, which was obtained from
Yahoo Finance, as shown in the following chart:
Source: Yahoo Finance (http://finance.yahoo.com/q/ae?s=KO+Analyst+Estimates)
Such growth estimations are aligned to KO’s current future plan
denominated “2020 Vision”, which main objective is to reach revenues
of US$200 billion by the end of year 2020 for both worldwide KO
companies as well as bottling partners (meaning the double of 2010
revenues).
In order to determine estimated growth rate for cost of goods sold, as
well as for selling, general and administrative expenses, we determined
the average over historical information of the previous 4 years to project
KO’s operating expenses. In this regard, we expect that such growth rate
will remain the same for the next 10 year period.
Investing Assumptions
In order to determine the annual Capex for KO’s cash flow, we identified
the following ratio:
The proportion of Capex over Revenues during last 5 years was stable,
therefore in order to determine annual Capex for the 10 year-period cash
flow (from 2012 to 2021) we used the 2011 result of 15.94.
December 31, 2007 2008 2009 2010 2011
Capital Expenditures (Capex) 1,648 1,968 1,993 2,215 2,920
Property, plant and equipment - net 8,493 8,326 9,561 14,727 14,939
Property, plant and equipment - gross 9,656 9,554 10,797 16,170 16,893
Net Operating Revenues (NOR) 28,857 31,944 30,990 35,119 46,542
NOR / Capex 17.51 16.23 15.55 15.86 15.94
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
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Financial Performance
Profitability
KO's gross profit margin for fiscal year 2011 decreased to 60.9% from
63.9% in 2010, mainly explained for the difference between sales’
increase in 2011 versus 2010 of 32.5%, while cost of goods sold
increased in 44.8%, for same periods. Such difference may be explained
for the acquisition of the CCE North American business, mainly due to
the increase of the purchase cost of supplies such PET, metals, etc.
Liquidity
According to the liquidity ratios average obtained in the chart above, KO
showed a weaker liquidity position versus 2010, based on the result of its
quick ratio of 0.92 and 1.02, respectively. Such situation may indicate a
potential lack of ability to cover short-term cash needs, but not in the
case of KO because one of its main strength is the ability of generating
cash, and the consistently accomplishment of its financial commitments.
Efficiency
Inventories balance by the end of 2011 amounted to US$3 billion,
showing a stock increase of 16.7% versus 2010. Also, we observed that
in the last 3 years KO showed a decrease of the “days’ inventory
outstanding ratio” from 85 days in 2010 to 68 days in 2011.
Accounts receivable showed a balance in 2011 of US$4.9 billion, which
in comparison to 2010 decreased in 11.1%. Also, we observed that “daily
sales outstanding ratio” in 2011 was 38.06 days in comparison to 45.41
days in 2010, which indicates KO’s ability to collect cash in waiting.
Accounts payable balance as of 2011 amounted to US$9 billion,
increased in 1.1% versus same balance in 2010. In regards to “days
payable outstanding ratio” we observed that it decreased in 2011 versus
2010 (199 and 283 days, respectively), however despite of this it still
indicates that KO’s credit terms with suppliers are still appropriate and
Liquidity Ratios
2009 2010 2011 Average
Current ratio 1.28 1.17 1.05 1.17
Quick ratio 1.11 1.02 0.92 1.02
Efficiency Ratios 2009 2010 2011 Average
Current Receivables turnover ratio 8.25 7.93 9.46 8.54
Debtors payment period 43.66 45.41 38.06 42.37
Inventory turnover ratio 4.19 4.25 5.26
Days Inventory Outstanding 86.02 84.80 68.45 79.76
Current Payables turnover ratio 1.48 1.27 1.81
Creditors payment period 243.25 283.49 199.44 242.06
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
13
allow KO to obtain indirect financing.
Debt
KO shows leverage level of 1.51 in 2011, which has been increasing
during last 3 years. This indicates that KO in the last year has been over-
leveraged with debt, which is explained in the strategy followed by KO
of obtaining financial capital by using debt financing, instead of issuance
of stock.
On the other hand, the “long term debt to total asset ratio” has increased
in 2011 in comparison with previous years to 8% from 5.91% in 2010
and 0.29% in 2009, which means that KO’s level of long debt had an
important growth during last year.
Also it is important to mention that as part of KO cash flow strategy is
included the continuous review of the level of short-term and long-term
debt, mainly in order to determine whether or not it is necessary the use
of the short-term Commercial Paper program, or the replacement of
short-term debt to long-term financing.
Sensitivity analysis
We performed the analysis by changing some main assumptions, as
follows:
Stock price
According to the analysis performed and in order to get closer to the
current share price as of end of June 2012 (US$78), KO growth rate from
2022 to perpetuity must decrease to 1%, which seems not possible due to
the growing markets where KO is currently involved.
Debt Ratios
2009 2010 2011 Average
Debt to equity ratio 0.92 1.33 1.51 1.25
Long Term Debt to Total Asset Ratio 0.29% 5.91% 8.00% 4.74%
Sales growth
perpetuity
Share price
92.02
-0.5% 63.06
0.0% 66.92
1.0% 76.95
1.5% 83.65
2.0% 92.02
2.5% 102.81
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
14
Cost of goods sold
By the end of 2011, the cost of goods sold represents the 36% of total
sales. As per our analysis, such percentage would have to increase up to
37% in order to get closer to the share price as of the end of June 2012.
Such increase is unlikely to occur due to efficient cost control currently
implemented by KO.
WACC
As a result of the cash flow prepared for KO (for a 10 years-period), we
obtained a WACC of 5.98%. Therefore only if the WACC increases up
to 6.5% the KO share price would be closer to the current share price up
to the end of June 2012.
Crossed-drivers sensibility analysis
We also performed a crossed analysis of the main drivers in order to
determine how the NPV is affected as shown in the following chart:
Cost of goods
sold
Share price
92.02
29.0% 125.79
31.0% 114.42
33.0% 103.05
35.0% 91.69
37.0% 80.32
39.0% 68.95
WACC Share price
92.02
5.0% 127.83
5.5% 107.08
6.0% 91.54
6.5% 79.48
7.0% 69.85
7.5% 61.99
NPV Cost of goods sold
Sales growth perpetuity 233,952 29.0% 31.0% 33.0% 35.0% 37.0% 39.0%
0.0% 234,662 215,116 195,570 176,023 156,477 136,931
0.5% 248,539 227,827 207,115 186,403 165,691 144,979
1.0% 265,201 243,089 220,977 198,865 176,754 154,642
1.5% 285,580 261,756 237,932 214,108 190,285 166,461
2.0% 311,077 285,111 259,145 233,179 207,213 181,247
2.5% 343,896 315,173 286,450 257,727 229,004 200,281
Reporte Financiero Burkenroad Perú – The Coca Cola Company Abril 11, 2009
15
As a result of the previous analysis, we determined that in order to
stabilize VPN, and in the case that revenues growth would be 0%, the
cost of goods sold should be reduced to 29% over revenues.
Risk analysis
From the performed analysis we determined that the probability of
obtaining a price stock greater than US$93 is 49.57%. It has been used as
the basis a standard deviation of 38.92.
Reporte Financiero Burkenroad Perú – The Coca Cola Company
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Table 1
Annual Balance Sheets (in millions of US Dollars)
December 31, 2008 2009 2010 2011
Cash and cash equivalents 4,701 7,021 8,517 12,803
Short-term investements 0 2,130 2,682 1,088
Total Cash, cash equivalents and short-term investments 4,701 9,151 11,199 13,891
Marketable securities 278 62 138 144
Trade accounts receivable, less allow ances of US$83 and US$48,
respectively
3,090 3,758 4,430 4,920
Inventories 2,187 2,354 2,650 3,092
Prepaid expenses and other assets 1,920 2,226 3,162 3,450
Total Current Assets 12,176 17,551 21,579 25,497
Equity method investments 5,316 6,217 6,954 7,233
Other investments, principally bottling companies 463 538 631 1,141
Other assets 1,733 1,976 2,121 3,495
Property, plant and equipment - net 8,326 9,561 14,727 14,939
Trademarks w ith indefinite lives 6,059 6,183 6,356 6,430
Bottler's franchise rights w ith indefinite lives 0 1,953 7,511 7,770
Goodw ill 4,029 4,224 11,665 12,219
Other intangible assets 2,417 468 1,377 1,250
Total Non - Current Assets 28,343 31,120 51,342 54,477
Total Assets 40,519 48,671 72,921 79,974
Accounts payable and accrued expenses 6,205 6,657 8,859 9,009
Loans and notes payable 6,066 6,749 8,100 12,871
Current maturities of long-term debt 465 51 1,276 2,041
Accrued income taxes 252 264 273 362
Total Current Liabilities 12,988 13,721 18,508 24,283
Long-term debt 2,781 5,059 14,041 13,656
Other liabilities 3,011 2,965 4,794 5,420
Deferred income taxes 877 1,580 4,261 4,694
Total Non - Current Liabilities 6,669 9,604 23,096 23,770
Total Liabilities 19,657 23,325 41,604 48,053
Common stock 880 880 880 880
Capital surplus 7,966 8,537 10,057 11,212
Reinvested earnings 38,513 41,537 49,278 53,550
Accumulated other comprehensive income (loss) -2,674 -757 -1,450 -2,703
Treasury stock, at cost -24,213 -25,398 -27,762 -31,304
Equity attributable to shareow ners of the Coca Cola Company 20,472 24,799 31,003 31,635
Equity attributable to noncontrolling interests 390 547 314 286
Total Equity 20,862 25,346 31,317 31,921
Total Liabilities and Equity 40,519 48,671 72,921 79,974
Reporte Financiero Burkenroad Perú – The Coca Cola Company
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Table 2
Annual Income Statements (in millions of US Dollars)
THE COCA COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions of USD)
Year Ended December 31, 2008 2009 2010 2011
Net Operating Revenues 31,944 30,990 35,119 46,542
Cost of goods sold 11,374 11,088 12,693 18,216
Gross Profit 20,570 19,902 22,426 28,326
Selling, general and administrative expenses 11,774 11,358 13,158 17,440
Other operating charges 350 313 819 732
Operating Income 8,446 8,231 8,449 10,154
Interest Income 333 249 317 483
Interest Expense 438 355 733 417
Equity income (loss) - net (874) 781 1,025 690
Other income (loss) - net 39 40 5,185 529
Income before income taxes 7,506 8,946 14,243 11,439
Income taxes 1,632 2,040 2,384 2,805
Consolidated net income 5,874 6,906 11,859 8,634
Less: Net income attributable to noncontrolling interests 67 82 50 62
Net income attributable to shareow ners of the Coca Cola Company 5,807 6,824 11,809 8,572
Reporte Financiero Burkenroad Perú – The Coca Cola Company
18
Tabla 3
Cash Flow Forecast (in millions of US Dollars)
CASH FLOW FORECAST 2 4 5 6 7 8 9 10
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net Operating Revenues 48,496.76 52,715.98 56,706.58 60,999.27 65,616.92 70,584.12 75,927.33 81,675.03 87,857.83 94,508.67
Cost of goods sold (16,945.00) (18,419.22) (19,813.55) (21,313.44) (22,926.87) (24,662.43) (26,529.38) (28,537.65) (30,697.95) (33,021.79)
Gross Profit 31,551.76 34,296.76 36,893.03 39,685.83 42,690.05 45,921.68 49,397.96 53,137.38 57,159.88 61,486.88
Selling, general and administrative expenses (18,172.48) (19,753.49) (21,248.82) (22,857.36) (24,587.66) (26,448.95) (28,451.13) (30,604.89) (32,921.68) (35,413.85)
Other operating charges (762.74) (829.10) (891.87) (959.38) (1,032.01) (1,110.13) (1,194.16) (1,284.56) (1,381.80) (1,486.41)
EBITDA 12,616.54 13,714.17 14,752.34 15,869.09 17,070.38 18,362.61 19,752.66 21,247.93 22,856.40 24,586.63
Depreciation (1,798.16) (2,128.90) (2,484.67) (2,867.37) (3,279.05) (3,721.89) (4,198.25) (4,710.67) (5,261.88) (5,854.82)
EBIT 10,818.37 11,585.28 12,267.67 13,001.72 13,791.33 14,640.72 15,554.41 16,537.26 17,594.52 18,731.81
Taxes (2,650.50) (2,838.39) (3,005.58) (3,185.42) (3,378.88) (3,586.98) (3,810.83) (4,051.63) (4,310.66) (4,589.29)
Depreciation 1,798.16 2,128.90 2,484.67 2,867.37 3,279.05 3,721.89 4,198.25 4,710.67 5,261.88 5,854.82
NOPAT 9,966.03 10,875.78 11,746.76 12,683.67 13,691.50 14,775.63 15,941.83 17,196.30 18,545.74 19,997.34
CAPEX (3,042.64) (3,307.35) (3,557.72) (3,827.04) (4,116.74) (4,428.38) (4,763.61) (5,124.21) (5,512.12) (5,929.38)
Working capital investment (1,016.15) (1,115.53) (1,055.08) (1,134.95) (1,220.87) (1,313.29) (1,412.70) (1,519.65) (1,634.68) (1,758.43)
Perpetuity 309,114.54
FCF 5,907.24 6,452.91 7,133.96 7,721.68 8,353.89 9,033.96 9,765.52 10,552.45 11,398.95 321,424.07
WACC 5.98%
NPV 235,727
LT Liabilities (in millions US$) 23,770
Equity value (in millions US$) 211,957
Shares outstanding (in millions) 2,284
Stock value (in US$) 93
Reporte Financiero Burkenroad Perú – The Coca Cola Company
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Table 4
Balance Sheet Forecast (in million of US Dollars)
THE COCA COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (FORECAST)
(In millions of USD)
December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Cash and cash equivalents 14,753 16,037 17,251 18,557 19,961 21,473 23,098 24,847 26,727 28,751
Short-term investements
Total Cash, cash equivalents & ST investments 14,753 16,037 17,251 18,557 19,961 21,473 23,098 24,847 26,727 28,751
Marketable securities
Trade accounts receivable 5,708 6,205 6,675 7,180 7,724 8,308 8,937 9,614 10,341 11,124
Inventories 3,754 4,081 4,390 4,722 5,079 5,464 5,877 6,322 6,801 7,316
Prepaid expenses and other assets
Total Current Assets 24,216 26,323 28,315 30,459 32,764 35,245 37,913 40,783 43,870 47,191
Equity method investments 6,430 6,430 6,430 6,430 6,430 6,430 6,430 6,430 6,430 6,430
Other assets 2,331 2,331 2,331 2,331 2,331 2,331 2,331 2,331 2,331 2,331
Property, plant and equipment - net 16,183 17,362 18,435 19,395 20,232 20,939 21,504 21,918 22,168 22,243
Trademarks w ith indefinite lives 6,257 6,257 6,257 6,257 6,257 6,257 6,257 6,257 6,257 6,257
Bottler's franchise rights w ith indefinite lives 4,309 4,309 4,309 4,309 4,309 4,309 4,309 4,309 4,309 4,309
Goodw ill 8,034 8,034 8,034 8,034 8,034 8,034 8,034 8,034 8,034 8,034
Other intangible assets 1,378 1,378 1,378 1,378 1,378 1,378 1,378 1,378 1,378 1,378
Total Non - Current Assets 44,922 46,101 47,174 48,134 48,971 49,678 50,243 50,657 50,907 50,982
Total Assets 69,138 72,423 75,489 78,592 81,736 84,922 88,156 91,439 94,777 98,172
Accounts payable and accrued expenses 11,394 12,385 13,322 14,331 15,416 16,583 17,838 19,188 20,641 22,203
Loans and notes payable 12,871 10,963 9,889 4,475 - - - - -
Current maturities of long-term debt 2,041 2,041 2,041 2,041 2,041 2,041 2,041 2,041 2,041 -
Accrued income taxes 288 288 288 288 288 288 288 288 288 288
Total Current Liabilities 26,593 25,677 25,540 21,135 17,744 18,911 20,167 21,517 22,970 22,491
Long-term debt 13,656 12,103 10,549 9,011 7,473 5,935 4,397 2,859 1,321 -
Other liabilities 4,048 4,048 4,048 4,048 4,048 4,048 4,048 4,048 4,048 4,048
Deferred income taxes 2,853 2,853 2,853 2,853 2,853 2,853 2,853 2,853 2,853 2,853
Total Non - Current Liabilities 20,557 19,003 17,450 15,912 14,374 12,836 11,298 9,760 8,222 6,901
Total Liabilities 47,150 44,680 42,990 37,046 32,118 31,747 31,464 31,277 31,191 29,392
Common stock 880 880 880 880 880 880 880 880 880 880
Capital surplus 11,212 11,212 11,212 11,212 11,212 11,212 11,212 11,212 11,212 11,212
Reinvested earnings 43,519 49,275 54,030 63,077 71,148 74,706 78,222 81,693 85,116 90,311
Accum. other comprehensive income (loss) (2,703) (2,703) (2,703) (2,703) (2,703) (2,703) (2,703) (2,703) (2,703) (2,703)
Treasury stock, at cost (31,304) (31,304) (31,304) (31,304) (31,304) (31,304) (31,304) (31,304) (31,304) (31,304)
Equity attributable to shareow ners 21,604 27,360 32,115 41,162 49,233 52,791 56,307 59,778 63,201 68,396
Equity attributable to noncontrolling interests 384 384 384 384 384 384 384 384 384 384
Total Equity 21,988 27,744 32,499 41,546 49,618 53,175 56,692 60,163 63,586 68,781
Total Liabilities and Equity 69,138 72,423 75,489 78,592 81,736 84,922 88,156 91,439 94,777 98,172
Reporte Financiero Burkenroad Perú – The Coca Cola Company
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Tabla 5
Income Statement Forecast (in million of US Dollars)
THE COCA COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT (FORECAST)
(In millions of USD)
Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net Operating Revenues 48,497 52,716 56,707 60,999 65,617 70,584 75,927 81,675 87,858 94,509
Cost of goods sold 18,743 20,548 22,298 24,181 26,206 28,384 30,728 33,248 35,960 38,877
Gross Profit 29,754 32,168 34,408 36,818 39,411 42,200 45,200 48,427 51,898 55,632
Selling, general and administrative expenses 18,172 19,753 21,249 22,857 24,588 26,449 28,451 30,605 32,922 35,414
Other operating charges 763 829 892 959 1,032 1,110 1,194 1,285 1,382 1,486
Operating Income 10,818 11,585 12,268 13,002 13,791 14,641 15,554 16,537 17,595 18,732
Interest Income 459 499 537 577 621 668 719 773 832 895
Interest Expense 667 725 780 839 902 971 1,044 1,123 1,208 1,299
Equity income (loss) - net 1,119 1,216 1,308 1,407 1,514 1,628 1,752 1,884 2,027 2,180
Other income (loss) - net 551 599 645 693 746 802 863 928 999 1,074
Income before income taxes 12,281 13,175 13,978 14,841 15,770 16,769 17,844 19,000 20,244 21,582
Income taxes 3,009 3,228 3,425 3,636 3,864 4,108 4,372 4,655 4,960 5,287
Consolidated net income 9,272 9,947 10,553 11,205 11,906 12,661 13,472 14,345 15,284 16,294
Less: Net income attributable to noncontrolling
interests
91 99 106 114 123 132 142 153 165 177
Net income attributable to shareow ners of the
Coca Cola Company
9,181 9,848 10,447 11,091 11,783 12,528 13,330 14,192 15,119 16,117
Reporte Financiero Burkenroad Perú Abril 3, 2009
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