USA – Keurig Dr Pepper Inc., a leading producer and distributor of hot and cold beverages, has reported second quarter 2018 results for Keurig Green Mountain and Dr Pepper Snapple Group for the period ending June 30, 2018.
According to the Keurig Dr Pepper, it had filed a Form 8-K/A with the U.S. Securities and Exchange Commission containing a presentation of KGM’s results for the second quarter ended June 30, 2018 and a Form 10-Q containing a presentation of DPS’s second quarter results.
Subsequent to the end of the second quarter, the merger of KGM and DPS was successfully completed.
The company reported that KGM net sales were even with year-ago, as strong volume/mix of 3.2% and favorable foreign currency translation of 0.5% were essentially offset by the moderating impact of strategic pricing actions initiated in 2016.
The operating income in the second quarter of 2018 totaled US$170 million, after giving effect to merger-related expenses totaling US$74 million and expenses related to the amortization of intangibles.
Adjusted operating income advanced 10.8% versus year-ago to US$288 million, an improvement of 290 basis points as a percentage of net sales.
KGM’s net sales performance in the second quarter of 2018 reflected high single-digit pod volume growth, driven primarily by growth in U.S. household penetration of the Keurig single-serve system, offset by lower net price realization due to strategic pricing actions and lower brewer sales due to timing related to brewer innovation.
Household penetration responded positively to increase marketing investment behind new brewer innovations, such as the K-Elite, introduced in March, and the K-Café, which debuted during the quarter.
KGM Adjusted operating income advanced 10.8% versus year-ago, primarily driven by the benefits of significant productivity savings and SG&A overhead cost management, partially offset by significantly higher planned advertising investment.
KGM has continued to significantly reduce net debt3, with a reduction of US$481 million at the end of the second quarter of 2018, compared to net debt at December 31, 2017, reflecting strong cash flow management and improved operating results.
Since the end of the second quarter of 2017, KGM’s strategy of rapid deleveraging has reduced term loans and the revolving credit facility by a total of approximately US$1.1 billion.
Dr Pepper Snapple Group (DPS) net sales increased 5.0% versus year-ago, primarily reflecting favorable mix and higher volume, despite the shift of Easter into the first quarter of 2018.
The operating income declined 3.5% versus year-ago, as expected, as inflationary cost increases have not yet been fully offset by pricing actions and productivity benefits, particularly in the Packaged Beverage segment.
Diluted EPS of US$1.30 advanced 27.5%, including the significant benefit in the second quarter of 2018 from the Tax Cuts and Jobs Act enacted in December 2017 and the favorable year-over-year impact from the 2017 loss on the early extinguishment of debt.
DPS’s net sales growth of 5% versus year-ago reflected the benefits of favorable mix of 3% and higher volume of 2%, including growth in contract manufacturing.
DPS operating income declined 3.5% to US$362 million, reflecting commodity inflation, particularly in plastics, aluminum and apples, higher logistics costs, increased planned marketing investments and higher administrative expenses, primarily behind the Packaged Beverage DSD organization.
“With the merger of these two great companies now behind us, our focus is on integration, optimization and ensuring delivery of the financial expectations we established.
We are very pleased with the progress to date.
The integration, in particular, is well on track, as evidenced by the establishment of the new KDP leadership team, and we remain very confident in our promised synergies and the future of our new Company,” said Keurig Dr Pepper CEO Bob Gamgort, commenting on the announcement.
“On financials, the second quarter results reported today are fully consistent with our full year outlook for 2018, and we are equally confident in the longer-term value creation framework we shared at our March 20, 2018 Investor Day.”