This summary is based on the third quarter fiscal 2008 earnings call conducted by The Coca-Cola Company (KO) on October 15, 2008.
Management:
Vice President and Director of Investor Relations: Ann Taylor
President and Chief Executive Officer: Muhtar Kent
Chief Financial Officer: Gary P. Fayard
President, North America Group: Sandy Douglas
Key Investors Issues
- EPS were 81 cents a share compared to 71 cents a share last year.
- Net profit rose 14% to $1.89 billion from $1.65 billion in the year-earlier period.
- Net operating revenue rose 9% to $8.39 billion.
Third Quarter Highlights
Net operating revenues increased 9%.
Revenue growth reflected a 3% increase in concentrate sales, a 2% benefit from pricing and mix and a 6% positive currency impact, partially offset by a 2% decrease from structural changes primarily resulting from the sale of certain bottlers.
- Operating income increased 20% on a reported basis and 17% after considering items impacting comparability. Items impacting comparability negatively affected third quarter pre-tax operating income by $47 million in 2008 and by $84 million in 2007. Currency benefited operating income by 9%.
- The company is on track for delivering $400 to $500 million in annualized savings from productivity initiatives by year-end 2011 to provide additional flexibility to invest for growth.
Unit case volume increased 5% in the third quarter and 4% year-to-date, successfully cycling 6% growth in the prior year quarter and year-to-date periods.
Acquisitions contributed 1 point of unit case volume growth for the quarter.
- International operations delivered 7% unit case volume growth, cycling 8% growth in the prior year quarter. Emerging markets continued to drive the results with China, Turkey, India, Southern Eurasia, Pakistan, Nigeria and Korea delivering double-digit unit case volume growth and Brazil, Eastern Europe, North and West Africa and the Middle East delivering high single-digit unit case volume growth. Europe achieved solid unit case volume growth of 3% in the quarter and unit case volume in Japan increased 1%. North America unit case volume declined 2%.
- The company continued to achieve solid growth in sparkling beverages, which increased unit case volume 3%. Key brands drove the results with Trademarks Coca-Cola, Fanta and Sprite increasing unit case volume 2%, 5% and 7%, respectively.
- Still beverage unit case volume increased 10%, led by strong growth across the company’s still brand portfolio, including juice and juice drink, tea, coffee, active lifestyle and water brands.
- Globally, the company gained volume and value share in nonalcoholic ready-to-drink beverages as well as in core sparkling and still beverage categories.
The Eurasia and Africa Group’s unit case volume increased 9%, cycling 13% growth in the prior year quarter.
- Net revenues increased 17%, benefiting from an 8% increase in concentrate sales and positive pricing and mix with negligible impact from currency.
- Operating income growth of 34% reflected the benefit of the net revenue increase, the continued investment in key business initiatives and the cycling of restructuring charges in the prior year.
- The group delivered solid unit case volume growth across most markets, with double-digit growth in key markets including Turkey, India, Southern Eurasia and Nigeria and high single-digit growth in the Middle East and North and West Africa. In the quarter, Russia’s unit case volume declined 3%, primarily reflecting the impact from continuing adverse weather conditions as well as a more challenging economic environment, and South Africa was up 1%. Share gains continued for the group led by volume and value share gains in Russia and Turkey in nonalcoholic ready-to-drink beverages.
Unit case volume in the Europe Group increased 3%.
- Net revenues increased 10%, reflecting even concentrate sales, positive pricing and mix and a high single-digit currency benefit.
- Operating income increased 14% primarily reflecting the higher net revenues while continuing to invest behind key marketing initiatives across the group.
- Unit case volume results were driven by mid single-digit growth in Northwest Europe and high single-digit growth in Eastern Europe. Europe delivered balanced growth with unit case volume for sparkling beverages up 3% and for still beverages up 9%. Key countries across the group including Germany, Great Britain and France gained volume and value share in nonalcoholic ready-to-drink beverages.
The Latin America Group continued to deliver strong unit case volume growth of 8%, cycling 9% growth in the prior year quarter.
- Net revenues increased 24%, reflecting a 5% increase in concentrate sales, positive pricing and mix and a low double-digit currency benefit.
- Operating income increased 30%, reflecting the net revenue increase while continuing to invest in key marketing initiatives.
- Solid unit case volume growth across the group and the benefit of acquisitions drove the results. Acquisitions contributed 3 points of the overall unit case volume growth. Mexico, Brazil and Argentina achieved strong unit case volume growth of 7%, 7% and 5%, respectively, and led to volume and value share gains for the group in both sparkling and still beverages.
Unit case volume in the North America Group declined 2%, reflecting the continuing difficult U.S. economic environment.
- Retail unit case volume declined 1% and Foodservice and Hospitality declined 3%.
- Net revenues decreased 2%, reflecting a 3% decrease in concentrate sales, partially offset by positive pricing and mix of finished goods.
- Operating income decreased 12% reflecting the decrease in net revenues, higher input costs in the finished goods businesses, unfavorable mix and continued investment behind strategic marketing programs.
- Sparkling beverage unit case volume declined 2%. Core sparkling beverages gained volume and value share reflecting the benefits of the strong, integrated Olympics program. The continued successful execution of the three-cola strategy resulted in Coca-Cola Classic, Diet Coke and Coca-Cola Zero combined gaining volume and value share in the U.S. Coca-Cola Zero continued to deliver strong performance, increasing unit case volume 30%, cycling strong double-digit growth in the prior year quarter.
- Still beverage unit case volume was even and achieved volume and value share gains, due to the continued strong performance of glacéau and Fuze as well as strong growth in chilled warehouse juices and juice drinks behind the success of Trademark Simply and Minute Maid Enhanced Juices.
