(Source: Business Wire)
The Coca-Cola Company reports sound third quarter 2009 operating results
with unit case volume increasing 2 percent, successfully cycling 5
percent growth in the prior year quarter. Internationally, we achieved
broad-based unit case volume growth of 4 percent, cycling 7 percent
growth in the prior year quarter. In the quarter, unit case volume
growth increased strongly in key emerging markets with 37 percent growth
in India, 15 percent growth in China and 3 percent growth in Brazil.
Globally, we gained volume and value share in nonalcoholic
ready-to-drink beverages for the ninth consecutive quarter. The global
"Open Happiness" campaign continued to fuel growth of brand Coca-Cola.
Notably, brand Coca-Cola unit case volume growth was strong, up 2
percent in the quarter, across both developed and emerging markets
including 8 percent growth in Mexico, 6 percent growth in Italy, 27
percent growth in India and 3 percent growth in China. Total sparkling
beverage unit case volume increased 1 percent in the quarter, with
international sparkling beverage unit case volume increasing 2 percent,
cycling 5 percent growth in the prior year quarter. Total still beverage
unit case volume increased 7 percent in the quarter, led by sound growth
across the portfolio, including juices and fruit stills, teas and water
brands. Still beverage unit case volume increased 10 percent
internationally and was even in North America.
"I am pleased to report that we have again delivered solid results this
quarter," said Muhtar Kent, chairman and chief executive officer, The
Coca-Cola Company. "We continue to grow our currency neutral revenues,
gain global nonalcoholic ready-to-drink volume and value share, expand
our margins and invest in our business, all while generating tremendous
cash flow. The fundamentals of our business remain strong and our
franchise system is delivering results that keep us on track to achieve
our long-term growth expectations. Although we expect the consumer to
continue facing economic uncertainties into 2010 and for consumer
sentiment to recover slowly, we believe more than ever that we have the
right strategies being executed, the right leadership team in place and
have taken the right actions this year to drive continued growth and to
make the most of the abundant opportunities before us."
"This is a dynamic time in the history and evolution of our Company,"
said Mr. Kent. "With our 2020 Vision, we have a clear Coca-Cola system
vision for the future of our business, and we are applying that vision
in our strategic planning, system alignment and focused execution. Each
day we work diligently to make our Company stronger for the future and
to ensure that we continue driving long-term sustainable results, while
delivering the beverages that consumers love."
FINANCIAL HIGHLIGHTS
Year-to-date reported net revenues decreased 5 percent. After
excluding structural items, year-to-date net revenues increased 5
percent on a comparable currency neutral basis, in line with our
long-term growth target.
Year-to-date reported operating income decreased 4 percent. With
continued focus on cost management and by leveraging our productivity
initiatives, year-to-date operating income increased 9 percent on a
comparable currency neutral basis, exceeding our long-term growth
target.
Year-to-date cash from operations increased to $6.3 billion, and we
repurchased $241 million of our stock in the third quarter.
OPERATING REVIEW
Three Months Ended October 2, 2009
% Favorable / (Unfavorable)
Unit Case Volume Net Revenues Operating Income Comparable Currency Neutral Operating Income
Total Company 2 (4) (2) 9
Eurasia & Africa 2 (9) 2 13
Europe (2) (10) (3) 7
Latin America 7 (3) 0 18
North America (4) (2) 10 9
Pacific 6 (1) (10) (17)
Bottling Investments 4 (4) 26 56
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Nine Months Ended October 2, 2009
% Favorable / (Unfavorable)
Unit Case Volume Net Revenues Operating Income Comparable Currency Neutral Operating Income
Total Company 2 (5) (4) 9
Eurasia & Africa 4 (9) (6) 13
Europe (1) (13) (9) 4
Latin America 6 (5) (7) 15
North America (2) 1 12 13
Pacific 5 4 1 (3)
Bottling Investments (1) (12) (43) 24
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Eurasia & Africa
Our Eurasia and Africa Group's unit case volume increased 2 percent in
the quarter, cycling 9 percent growth in the prior year quarter.
Year-to-date unit case volume increased 4 percent, cycling 7 percent
growth in the prior year period. Net revenues for the quarter
decreased 9 percent, reflecting a 6 percent increase in concentrate
sales offset by a double-digit negative impact from currencies and
negative pricing and mix. Reported operating income increased 2
percent in the quarter. Comparable currency neutral operating income
increased 13 percent due to the increase in concentrate sales and
tight expense management.
In Eurasia and Africa, sparkling beverages increased 1 percent and
still beverages increased 7 percent in the quarter. The growth in unit
case volume was led by a 37 percent increase in India, which cycled an
18 percent increase in the prior year. Africa also reported strong
unit case volume growth in the quarter with the East and Central
Region growing 11 percent, cycling 7 percent growth in the prior year,
and the North and West Region growing 5 percent, cycling 9 percent
growth in the prior year. Reflecting the impact of a continued
challenging economic environment, Russia reported a double-digit unit
case volume decline but gained share in nonalcoholic ready-to-drink
beverages.
In the quarter, Eurasia and Africa gained volume and value share in
nonalcoholic ready-to-drink beverages. India gained volume and value
share across most categories including sparkling, still and juice and
juice drinks.
Europe
Our Europe Group's unit case volume decreased 2 percent in the
quarter, cycling 3 percent growth in the prior year quarter,
reflecting a challenging macroeconomic environment. Year-to-date unit
case volume decreased 1 percent, cycling 2 percent growth in the prior
year period. Net revenues for the quarter decreased 10 percent,
primarily driven by a double-digit negative impact from currencies and
a 1 percent decrease in concentrate sales, partially offset by
positive pricing and mix. Reported operating income decreased 3
percent in the quarter. Comparable currency neutral operating income
increased 7 percent benefiting from tight expense management.
Unit case volume growth in Northwest Europe was offset by weakness in
Spain and Eastern Europe due to significant macroeconomic challenges
in those regions.
In the quarter, Europe gained volume and value share in nonalcoholic
ready-to-drink beverages and gained value share across all key
countries.
Latin America
Our Latin America Group continued to deliver strong unit case volume
growth with 7 percent growth in the quarter, cycling 8 percent growth
in the prior year quarter. Year-to-date unit case volume increased 6
percent, cycling 8 percent growth in the prior year period. Net
revenues for the quarter decreased 3 percent, primarily due to a
double-digit negative impact from currencies, partially offset by a 6
percent increase in concentrate sales and a double-digit positive
impact from pricing and mix. Reported operating income was even with
the prior year quarter. Comparable currency neutral operating income
increased 18 percent primarily reflecting the higher concentrate sales
and positive pricing and mix partially offset by continued investment
in key marketing and business initiatives.
Strong unit case volume growth in the quarter was led by a 9 percent
increase in Mexico, a 3 percent increase in Brazil and an 11 percent
increase in our Latin Center Region.
Latin America delivered growth across the portfolio with sparkling
beverages increasing 4 percent and still beverages increasing 21
percent in the quarter. Notably, brand Coca-Cola and Trademark
Coca-Cola both grew 5 percent in the quarter.
In the quarter, the Latin America Group gained volume and value share
in both the sparkling and still categories.
North America
Our North America Group's unit case volume declined 4 percent in the
quarter primarily due to the shift of the July 4th holiday volume from
the third quarter into the second quarter, an aggressive competitive
pricing environment within still beverages and the continuing
difficult macroeconomic environment. Year-to-date unit case volume
decreased 2 percent. Net revenues for the quarter decreased 2 percent,
reflecting a 1 percent positive impact from pricing and mix offset by
a 3 percent decrease in concentrate sales. Reported operating income
increased 10 percent in the quarter primarily reflecting lower cost of
goods sold attributable to lower commodity costs and the benefits of
our ongoing productivity initiatives.
Unit case volume for sparkling beverages declined 5 percent in the
quarter as we cycle the industry-leading bottler pricing taken in the
latter part of 2008; however, brand health scores continued to
improve. Importantly, Coca-Cola Zero delivered double-digit unit case
volume growth in the quarter, achieving 14 consecutive quarters of
double-digit growth.
Still beverage unit case volume was even in the quarter. Still volume
in our Foodservice and Hospitality business continued to grow, driven
by innovation and new segmented customer offerings in our tea
portfolio.
In the quarter, North America gained significant value share in
nonalcoholic ready-to-drink beverages for the fourth consecutive
quarter. Still beverages gained volume share for the ninth consecutive
quarter and gained value share for the fourth consecutive quarter, led
by strong performance in our Foodservice and Hospitality business and
Trademark Simply. Trademark Simply continued to perform strongly with
new flavor innovations and expanded availability, contributing to
share gains in the juice and juice drinks category.
Pacific
Our Pacific Group delivered unit case volume growth of 6 percent in
the quarter, cycling 7 percent growth in the prior year quarter.
Year-to-date unit case volume growth increased 5 percent, cycling 7
percent growth in the prior year period. Net revenues for the quarter
decreased 1 percent, reflecting a mid single-digit positive impact
from currencies and a 3 percent increase in concentrate sales offset
by negative country and channel mix. Reported operating income
decreased 10 percent in the quarter. Comparable currency neutral
operating income decreased 17 percent primarily reflecting negative
country and channel mix partially offset by higher concentrate sales.
Pacific delivered unit case volume growth across the portfolio with
sparkling beverages increasing 5 percent and still beverages
increasing 8 percent in the quarter. Importantly, Trademark Coca-Cola
grew 4 percent in the quarter.
In China, unit case volume grew 15 percent in the quarter driven by
double-digit growth in Trademark Sprite and Minute Maid, as well as
mid single-digit growth in Trademark Coca-Cola, contributing to volume
and value share gains across sparkling and still beverages.
In Japan, unit case volume growth declined 4 percent in the quarter
reflecting the weak economy and unfavorable weather. However, our
business in Japan continued to outperform the nonalcoholic
ready-to-drink industry, resulting in the sixth consecutive quarter of
share gains. Importantly, Georgia Coffee unit case volume increased 1
percent in the quarter driven by the introduction of additional
low-calorie options and our new "Welcome to Georgia" campaign.
Bottling Investments
Our Bottling Investments Group's unit case volume increased 4 percent
in the quarter, primarily driven by strong growth in China, India and
the Philippines, partially offset by the impact of the Pakistan
bottler divestiture in the prior year. Net revenues for the quarter
decreased 4 percent, primarily reflecting the increase in unit case
volume offset by a negative currency impact and the impact of the
divestiture in the prior year. Reported operating income increased 26
percent in the quarter while comparable currency neutral operating
income increased 56 percent, primarily driven by favorable commodity
costs and tight expense management.
FINANCIAL REVIEW
Net operating revenues for the quarter decreased 4 percent, driven by a
6 percent negative currency impact and a 1 percent negative impact from
a structural change offset by a 2 percent increase in concentrate sales
and a 1 percent positive impact from pricing and mix. The structural
change relates to the divestiture of a portion of our ownership interest
in the Pakistan bottler in 2008, which resulted in its deconsolidation.
Excluding the impact of this divestiture, our comparable currency
neutral net revenues increased 5 percent year-to-date, in line with our
long-term growth target.
Cost of goods sold decreased 3 percent in the quarter. This decrease is
primarily driven by the 2 percent increase in concentrate sales offset
by a 3 percent impact from currencies and a 1 percent impact from the
structural change related to our bottling investments.
Selling, general and administrative expenses decreased 7 percent in the
quarter primarily driven by a 6 percent currency impact. In addition,
the decrease was partly attributable to our more effective management of
general and administrative expenses, the structural change related to
bottling investments and a net decrease in incentive compensation
expense partially offset by an increase in pension costs.
Reported and comparable operating income decreased 2 percent in the
quarter. Items impacting comparability reduced operating income by $48
million in 2009 and by $47 million in 2008 and were primarily related to
restructuring charges and costs related to global productivity
initiatives. Comparable currency neutral operating income increased 9
percent in the quarter, exceeding our long-term growth target. Currency
negatively impacted comparable operating income by 11 percent in the
quarter. After considering current spot rates, the anticipated benefits
of our hedging coverage and the cycling of prior year exchange rates, we
expect currencies to have a low to mid single-digit positive impact on
operating income in the fourth quarter of 2009.
For the third quarter of 2009, our reported earnings per share were
$0.81, even with the third quarter of 2008. Reported earnings per share
for the third quarter of 2009 and 2008 included a net charge of $0.01
and $0.02 per share, respectively, primarily due to restructuring
charges and costs related to global productivity initiatives. The 2008
net charge also included a gain on the sale of a portion of our
investment in the Pakistan bottler. After considering the items
impacting comparability, earnings per share in the quarter were $0.82, a
decrease of 1 percent versus the third quarter of 2008. Earnings per
share continue to be negatively impacted by the relative strength of the
U.S. dollar versus other currencies around the world.
Cash from operations was $6.3 billion year-to-date compared with $5.7
billion in the prior year period, an increase of 11 percent. This
increase was driven by an improvement in working capital versus the
prior year. In the third quarter, we repurchased $241 million of our
stock, and we intend to repurchase up to $1 billion of stock by year end.
Effective Tax Rate
The Company's estimated effective tax rate reflects, among other items,
our best estimates for 2009 operating results and foreign currency
exchange rates. If actual results are different than these estimates,
the underlying effective tax rate could change.
As discussed in the second quarter earnings release, we had previously
estimated that the underlying effective tax rate on operations would be
approximately 23.5 percent for the full year. We now anticipate that the
underlying effective tax rate on operations for the full year 2009 will
be approximately 23.0 percent. We are required to record income tax
expense for the first nine months of the year based on the estimated
effective tax rate for the full year. To bring the effective tax rate
for the first nine months of 2009 in line with the current estimated
full year underlying effective tax rate, we recorded income tax expense
at an underlying effective tax rate of approximately 22.0 percent in the
third quarter.
Our estimated underlying effective tax rate does not reflect the impact
of significant or unusual items and discrete events, which, if and when
they occur, are separately recognized in the appropriate period. The
reported effective tax rate for the quarter was 21.4 percent.
Items Impacting Prior Year Results
Third quarter 2008 results included a net charge of $0.02 per share
primarily due to restructuring charges and costs related to global
productivity initiatives partially offset by a gain on the sale of a
portion of our investment in the Pakistan bottler.
Second quarter 2008 results included a net charge of $0.40 per share
primarily related to charges recorded by our equity method investees,
restructuring charges and asset write-downs.
First quarter 2008 results included a net charge of $0.03 per share
primarily related to restructuring charges and asset write-downs.
NOTES
All references to growth rate percentages and share compare the
results of the period to those of the prior year comparable period.
All references to unit case volume percentage changes are computed
based on average daily sales for all periods presented.
2009 year-to-date results are positively impacted by five additional
selling days, which will be offset by six fewer selling days in the
fourth quarter.
Our long-term growth targets as referenced in this release are on a
comparable currency neutral basis and exclude structural changes.
CONFERENCE CALL
We are hosting a conference call with investors and analysts to discuss
our 2009 third quarter and year-to-date results today at 9:30 a.m.
(EDT). We invite investors to listen to the live audiocast of the
conference call at our website, http://www.thecoca-colacompany.com/investors/index.html
in the "Investors" section. A replay in downloadable MP3 format will
also be available within 24 hours after the audiocast on our website.
