Bloomberg News

Coca-Cola Profit Tops Analysts’ Estimates as Asia Sales Jump

February 07, 2012

(Updates with CEO’s comment starting in eighth paragraph.)

Feb. 7 (Bloomberg) -- Coca-Cola Co., the world’s largest soft-drink maker, reported fourth-quarter profit that topped analysts’ estimates as teas and juices boosted sales in Asia.

Profit excluding some items was 79 cents a share, Atlanta- based Coca-Cola said today in a statement. That exceeded the 77- cent average of 14 analysts’ estimates compiled by Bloomberg. Net income in the quarter fell to $1.65 billion, or 72 cents a share, from $5.77 billion, or $2.46, a year earlier, when the company posted a gain from an acquisition.

Chief Executive Officer Muhtar Kent is expanding sales of beverages in Asia with global marketing campaigns and products such as its Minute Maid Pulpy juice drink. Fourth-quarter sales volume climbed 5 percent in Japan and 10 percent in China.

“Coke’s fourth-quarter results benefited from continued strength from its international beverage portfolio,” Ann Gurkin, an analyst for Davenport & Co. in Richmond, Virginia, said today in a telephone interview. “We also found the continued strong performance by the Coca-Cola and Coke Zero franchises as a standout for the North American segment.”

Coca-Cola rose 0.8 percent to $68.55 at 4 p.m. in New York. The shares climbed 6.4 percent last year, while PepsiCo Inc. gained 1.6 percent.

The company also said it plans to reduce costs by $550 million to $650 million by 2015 and use the savings to invest in its brands and mitigate higher commodities prices. Coca-Cola said it exceeded the $500 million it sought to cut during the four years that ended in the last quarter.

Higher Prices

Coca-Cola, which is facing higher costs for commodities such as plastic and corn-based sweeteners, raised pricing to retailers in North America by 1 percent for the year, less than the 2 percent to 3 percent it forecast in October.

Kent said demand is strong for its flagship Coca-Cola soft drink, with volume sales gaining 1 percent even as the company raised retail pricing for carbonated beverages by 4 percent.

“It’s a testament to the strength of our brands,” Kent said in a telephone interview.

Commodity costs this year may increase as much as $450 million from 2011, driven by juice ingredients and sweeteners, Chief Financial Officer Gary Fayard said on a conference call with analysts. Foreign-currency fluctuations may reduce operating income in 2012 by a mid-single digit percentage, Fayard said.

“We have the right strategic plans in place to mitigate the impacts of these incremental commodity costs and remain confident in our ability to achieve our long-term growth targets,” Fayard said on the call.

North American Sales

Fourth-quarter sales volume in North America gained 1 percent. Volume sales of Coca-Cola’s flagship soft drink in the region grew 1 percent in the quarter, while Coke Zero increased by a high single-digit percentage, the company said.

Total sales in the quarter rose 5.2 percent to $11 billion, matching the average estimate of 11 analysts. The Pacific region unit, which includes China and Japan, boosted sales volume 5 percent. In the company’s Eurasia and Africa group, volume climbed 4 percent while operating income jumped 16 percent. Sales volume in India rose 20 percent.

In the year-earlier quarter, Coca-Cola recorded a $5 billion gain for the 33 percent stake in Coca-Cola Enterprises Inc. it traded in the purchase of the bottler’s North American operations.

(Coca-Cola held a conference call at 9:30 a.m. New York time to discuss results. To listen, visit LIVE <GO>.)

--Editors: Kevin Orland, Robin Ajello

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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