The Coca-Cola Company (KO)
Q1 2009 Earnings Call Transcript
April 21, 2009 9:30 a.m. ET

Executives

Jackson Kelly - Vice President and Director of Investor Relations
Muhtar Kent – Chairman, President and Chief Executive Officer
Gary P. Fayard – Executive Vice President and Chief Financial Officer

Analysts

John Faucher - JPMorgan
Bill Pecoriello – Consumer Edge Research
Christine Farkas – Bank of America/Merrill Lynch
Carlos Laboy - Credit Suisse
Mark Swartzberg - Stifel Nicolaus & Company, Inc.
Lauren Torres - HSBC
Celso Sanchez – Citigroup
Judy Hong - Goldman Sachs & Company, Inc.
Damien Witkowski - Gabelli & Company
Kaumil Gajrawala - UBS

Presentation

Operator

Welcome and thank you all for standing by. At this time, I would like to welcome everyone to The Coca-Cola Company’s first quarter 2009 earnings results conference call. Today’s call is being recorded. If you have any objections, you may disconnect at this time. All participants will be on listen-only mode until the formal question-and-answer portion of the call. If you would like to ask a question, press “*1” on your touchtone phone. To withdraw your question, press “*2”. If you are on a speakerphone, please pick up the handset before asking your question. Participants will be announced by their name and company. Due to the interest in this call we request that a limit of one question per person. I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola’s Media Relations Department if they have questions. And now I would like to introduce Mr. Jackson Kelly, Director of Investor Relations. Mr. Kelly, you may begin.

Jackson Kelly

Good morning and thank you for being with us today. I am joined by Muhtar Kent, our President and Chief Executive Officer, and Gary Fayard, our Chief Financial Officer. Following prepared remarks this morning by Muhtar and Gary we will turn the call over to you for questions.

Before we get started, I would like to remind you that this conference call may contain forward-looking statements, including statements concerning long-term earnings objectives, and should be considered in conjunction with cautionary statements contained in our earnings release and in the company''s most recent periodic SEC report.

In addition, I would also like to note that we have posted schedules on our company website at www.thecoca-colacompany.com under the Financial Information tab in the Investor section which reconciles certain non-GAAP financial measures that may be referred to by our senior executives in our discussion this morning and from time to time in discussing our financial performance to our results as reported under Generally Accepted Accounting Principles. Please look on our website for this information.

I would now like to turn the call over to Muhtar Kent.

Muhtar Kent

Thank you, Jackson and good morning everyone. Before we get into an overview of our performance let me just start by saying how humbled and honored I am to take on the additional role and responsibility of Chairman of the Board for our company. I am honored to succeed my good friend, Neville Isdell in this capacity. Future histories written about Coca-Cola will show that Neville helped lead our company out of some very tough times. His statesmanship and passion for improving the environmental, social and economic well-being of our planet has been invaluable for everyone touched by our company, our system and our brands.

I am pleased to report another solid quarter of growth for The Coca-Cola Company despite severe global economic headwinds. We again exceeded our long-term profit targets, delivered volume growth in line with our expectations and executed on productivity initiatives ahead of schedule. Importantly, we delivered consistent and balanced top and bottom line performance results.

Globally, our unit case volume increased 2%, successfully cycling 6% growth in the first quarter of last year. Our international operations increased volume 3%, cycling 8%. These sound results reflect a company-wide disciplined focus on balancing the volume value equation to deliver consistent, quality revenue and operating income growth. We delivered quarterly revenue growth of 7% and operating profit growth of 17% on an ongoing currency neutral basis. Our worldwide team continued to drive productivity initiatives and cost savings throughout the business, routinely adjusting and tweaking our actions to changing market conditions.

We remain well on track to deliver $500 million in annualized savings from these productivity initiatives by year-end 2011. The continued acceleration of these efforts is enabling our cash to be redeployed to drive investments for growth. As expected, global currency fluctuations negatively impacted results this quarter. We continue to monitor this volatility and actively manage this risk where appropriate. As a reminder, we manage our global businesses in local currencies in order to make more effective decisions that deliver long-term, sustainable growth.

Our international markets remain significant contributors to our solid performance results. Our systems reach provides expanding opportunities to touch more and more customers every day and in turn create new revenue streams for our sparkling as well as still brands. The company achieved unit case volume growth across a diverse geographic footprint. Many key markets delivered at or above expectations this quarter with Mexico up 6% and Brazil growing 4%, both cycling 11% growth from prior year.

Northwest Europe was up 3% on strong performance in Great Britain. Also, Korea increased 5% as our new bottling partner continued to improve execution in the market place. We continue to gain strength in many emerging markets. In our 120 countries with per caps less than 150, our volume growth was 4% for the quarter cycling 10% in the prior year. India was up 31% and China up 10% both cycling double-digit growth. In Southeast Asia, Thailand was up 7% and Vietnam 8% while Nigeria was up 6% and Southern Eurasia 7%.