Coke Posts Strong Profit on Weak Dollar
{{#rendered}} {{/rendered}}The Coca-Cola Co. (KO) reported a 16 percent jump in second-quarter profit on solid revenue, but said it is experiencing challenges in several international markets.
The results, announced after the market closed Thursday, beat Wall Street estimates by a penny.
The world's largest beverage maker said it earned $1.58 billion, or 65 cents a share, for the three months ending June 30, compared to a profit of $1.36 billion, or 55 cents a share, in the year-ago period.
{{#rendered}} {{/rendered}}Excluding one-time items — including a favorable tax settlement and writedowns of various manufacturing investments — Atlanta-based Coke said it earned $1.55 billion, or 64 cents share, On that basis, analysts surveyed by Thomson First Call were expecting earnings of 63 cents a share.
Revenue in the April-June period was $5.97 billion, up 5 percent from $5.70 billion a year ago.
"Our results in the quarter reflect solid performance in many markets, but we are experiencing challenging conditions in several key countries, including Germany, Mexico and the Philippines," chief executive Neville Isdell said.
{{#rendered}} {{/rendered}}"Within these markets, we expect the environment to remain difficult throughout the remainder of this year while we focus on improving our short-term performance and strengthening our system's long-term capabilities."
In Germany, unit case volume declined 15 percent in the second quarter. Coke said it was affected there by poor weather and the rapid growth of discounters.
In Mexico, unit case volume declined by 3 percent in the quarter. Coke cited unusual weather, especially in May, coupled with a company decision to focus water sales on smaller, single-serve and immediate consumption formats.
{{#rendered}} {{/rendered}}Coke said pricing and packaging initiatives led to volume declines in the Philippines and Indonesia.
Solid profit growth in Asia during the quarter was driven by strong performance in key markets such as Japan, China and Australia and currency benefits. Unit case volume for the group grew 4 percent.
Worldwide unit case volume increased 1 percent in the second quarter.
{{#rendered}} {{/rendered}}Overall, diet carbonated soft drinks continued to lead the second-quarter growth, with Diet Coke growing at 7 percent. Carbonated soft drinks also benefited from new brands.
Donald Knauss, the head of Coke's North America unit, told analysts in a conference call that Coca-Cola C2 (search ), the company's new mid-calorie cola, has been doing well in the six weeks since its launch. That comes despite some unfavorable reviews by analysts.
He said the drink has generated positive comments from consumers, although the company is working to improve its strategy on C2 pricing.
{{#rendered}} {{/rendered}}Purchase, N.Y.-based PepsiCo Inc. (PEP), Coke's chief rival, also has launched a mid-calorie cola, Pepsi Edge (search ).
For the first six months of the year, Coke said it earned $2.71 billion, or $1.11 a share, compared to a profit of $2.20 billion, or 89 cents a share, a year ago. The prior year results were affected by streamlining initiatives and a litigation settlement. Six-month revenue was $11.04 billion, an 8 percent increase from the $10.20 billion recorded a year ago.
Todd Stender, an analyst with Crowell, Weedon & Co. in Los Angeles, said he liked what he saw from Coke for the most part.
{{#rendered}} {{/rendered}}"Their cash flow is the thing that jumps off the page for me," Stender said. "That gives them an awful lot of flexibility."
Also Thursday, Coke said its board had declared a regular quarterly dividend of 25 cents per common share, and elected Chuck Fruit and Cynthia McCague as senior vice presidents.
Fruit was named chief marketing officer last month. McCague was named director of human resources.