The Coca-Cola Co. reported a slight profit increase in the second quarter Tuesday on solid sales in most of its markets, but its performance in North America was weak and a key metric in its bottling investment group was down.
The results beat Wall Street expectations when one-time items are excluded and analysts were mostly positive about the Atlanta-based company’s prospects.
Addressing the 2 percent unit case volume decline in its North America unit, Chief Operating Officer Muhtar Kent said during a conference call with investors and analysts, “Of course, I’m not satisfied with these results.”
Coca-Cola’s largest market is North America, which provides roughly 27 percent of the company’s overall unit case volume.
Kent said that while Coca-Cola knows there “will be bumps,” it is working on the challenges it faces in North America and believes the market will improve.
“Our actions in the quarter clearly reflect our commitment to the North America business,” Kent said.
Chief Executive Neville Isdell said Coca-Cola’s $4.1 billion purchase of Vitaminwater maker Glaceau, also known as Energy Brands, will help the company’s efforts to improve its business in North America. The deal to buy Glaceau, announced May 25, was completed last month.
Analysts said Coke’s outlook is strong.
“Emerging market momentum is robust, Coke is rehabilitating India and the Philippines, Japan and Europe are on better footing, and the U.S. is poised for better numbers,” Goldman Sachs beverage analysts said in a research note Tuesday.
There are some risks, however. One negative from the quarter was a 14 percent operating income decline in Coke’s bottling investment group, which consists of about a dozen bottlers around the world.
The Goldman Sachs note said “extreme weakness in Zimbabwe seems to have played a meaningful role in the shortfall.” Chief Financial Officer Gary Fayard said during the conference call that the problem was a one-time issue related partly to a restructuring charge.
For the three months ending June 29, Coca-Cola said it earned $1.85 billion, or 80 cents a share, compared to a profit of $1.84 billion, or 78 cents a share, for the same period a year ago.
Excluding one-time items, Coca-Cola said it earned $1.98 billion, or 85 cents a share, in the second-quarter. On a comparable basis, analysts surveyed by Thomson Financial were expecting earnings of 82 cents a share in the quarter.
Revenue rose to $7.73 billion, a 19 percent increase compared to $6.48 billion reported a year earlier.
For the first half of the year, Coca-Cola said it earned $3.11 billion, or $1.34 a share, compared to a profit of $2.94 billion, or $1.25 a share, for the same period last year. Six-month revenue rose 18 percent to $13.84 billion from $11.70 billion recorded in the same period a year earlier.
Total unit case volume increased 6 percent in the second-quarter.
Coca-Cola said its international operations recorded 9 percent unit case volume growth in the quarter, with solid sales in several countries including China, Turkey, India, Brazil and South Africa. One foreign market where Coca-Cola has had difficulty in the past, the Philippines, recorded double-digit unit case volume growth in the quarter. Coca-Cola acquired its Philippines bottler on Feb. 22.
Coca-Cola remains positive about its outlook for the remainder of the year, and it expects growth to continue across most of its markets, Fayard said Tuesday. The company did not release earnings guidance, in keeping with its past practice.
Coke shares fell 69 cents, or 1.3 percent, to $53.16 in afternoon trading.