Coca-Cola’s Latin America revenues down 8% through July

Argentina’s volatile economy also has impacted polyethylene terephthalate (PET), crucial to bottling and the soda giant’s bottom line. Above, a corner store sports bright red advertising in Ciudad de Salta, Argentina. (Thomas Vinke / imageBROKER/REX/Shutterstock)

HOUSTON (ICIS)–Coca-Cola’s operating revenues in Latin America fell 8% the first six months of 2016 compared with the first six months of 2015, the company revealed in its earnings call on Wednesday.

For the six months ended 1 July 2016, Latin American net operating revenues for Coca-Cola and its subsidiaries were $1.872bn. For the same period in 2015, operating revenues were $2.039bn.

Although the figures did not break out earnings for specific Latin American countries, the company mentioned during comments that Argentina did have a large impact on the region’s 2016 earnings.

“We believe the Argentinian government is taking the right steps to secure its economic recovery, but this is resulting in a contraction in the near-term that accelerated in the second quarter, therefore impacting our business,” said James Quincey, president and chief operating officer.

What was not mentioned was whether Coca-Cola will continue to invest $1bn over the next four years in Argentina’s expanding bottling operations. The company made the pledge in January, after meeting with then-new President Mauricio Macri.

Macri’s macroeconomic changes – aimed at opening Argentina to outside investment over the long term – has led to a weakening of the peso and a spike in inflation.

The economic changes have also led to a drop in polyethylene terephthalate (PET) prices in Argentina. PET values in the country – once the highest in the world – have fallen considerably since January.

The country has one producer of PET – DAK – and domestic consumption is at about 220,000 tonnes/year. DAK’s production capacity is at about 205,000 tonnes/year. The previous capacity of the plant was 190,000 tonnes/year, but increased after DAK debottlenecked the Zarate, Argentina plant in March.

Since then, the country has settled into its slow season for PET demand, forcing DAK to shut down the entire plant for maintenance. The plant will re-open in about six weeks.

PET prices in Argentina were assessed on Tuesday at a decrease, at $1,350-1,400/tonne.