Coca-Cola Sales Drop Further in India
Harry R. Weber
Associated Press
October 20, 2005

The company had reported on July 21, 2005 that its sales in India had dropped 14% in the April-June quarter, traditionally the biggest selling season for the company because of summer. - Editor

ATLANTA — The Coca-Cola Co., the world's largest beverage maker, reported a 37 per cent increase in third-quarter profit on strong sales especially in certain international markets.

The results, announced Thursday before the market opened, beat Wall Street expectations. Its shares rose $1.10 (U.S.) or 2.6 per cent to $42.90 in early New York trading.

The Atlanta-based company said it earned $1.28-billion, or 54 cents a share, for the three months ending Sept. 30, compared to a profit of $935-million, or 39 cents a share, for the same period a year ago.

Excluding one-time items, Coke said it earned $1.36-billion, or 57 cents a share, in the third quarter. On that basis, analysts surveyed by Thomson Financial were expecting earnings of 53 cents a share in the third quarter.

Revenue in the July-September period rose 8 per cent to $6.04-billion, compared to revenue of $5.60-billion in the same period a year ago.

“This quarter demonstrates early progress in our efforts to achieve sustainable growth for the future,” the company's chief executive, Neville Isdell, said in a statement. “We continue to see good results in many markets, including Latin America, Africa, Russia, Turkey, central Europe, Japan and China, and stabilization in an increasingly focused North America.”

However, Mr. Isdell said Coke still has a lot of work to do in other markets such as the Philippines, India and Germany, as well as to address certain trends in northwest Europe. The company also said it is monitoring energy prices to determine the potential effect on future results.

Overall, unit case volume increased 5 per cent in the third quarter. The company said it saw strong sales of its water brands, but soft sales of carbonated soft drinks, which saw unit case volume slip 1 per cent.

In North America, unit case volume grew 3 per cent. Unit case volume declined 1 per cent in Germany, but increased 4 per cent in Japan. Coke's unit case volume was especially strong in China, where it grew 23 per cent in the third quarter, but especially weak in India, where it dropped 22 per cent in the quarter due to raw material and distribution cost increases as well as the lingering effect of pesticide allegations, which Coke says are false.

Coke, which suffered in the past from uneven execution and an exodus of top-level executives, has been in turnaround mode in recent quarters. Mr. Isdell said in a conference call with analysts Thursday that the company's turnaround is on target, stoked in part by growth in non-carbonated drinks.

“We're on a journey,” he said. “I am satisfied with our progress to date, and believe our 18 to 24 month turnaround is on track. But I'm also realistic, and I realize there may be some bumps in the road.”

Strong international growth — particularly double-digit growth in Africa — shows that Coca-Cola is “the only truly global beverage company,” Mr. Isdell said.

Yet declines continue in India, the Philippines and Germany.

“It's going to take time to get these markets to where we want them to be,” he said.

Dominique Reiniche, president of Coca-Cola's European Union Group, said the company is working to address problems it has had in certain parts of Europe. She said multinational teams were forged to rapidly transfer knowledge between different European markets. Researchers in Italy and Central Europe have joined forces to launch healthy juices under the Minute Maid brand, she said.

For the first nine months of the year, Coca-Cola said it earned $4.01-billion, or $1.67 a share, compared to a profit of $3.65-billion, or $1.50 a share, for the same period a year ago. Nine-month revenue was $17.55-billion, a 6 per cent increase compared to the $16.54-billion recorded a year ago.

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