Emerging Markets Aid Coke's 14% Rise in Profits

20/10/06 The Coca-Cola Company has reported third quarter earnings per share growth of 15 percent on a reported basis and 9 percent after considering items impacting comparability. Coca-Cola reported a 14% increase in third-quarter profit as strength in Europe, as well as emerging markets such as Russia and Brazil, helped offset softness in North America.

Third quarter revenues increased 7 percent, reflecting a 4 percent increase in gallon sales, 1 percent currency benefit and 4 percent favorable impact from pricing and mix, offset by a 2 percent decrease from structural changes, primarily from the change in the business model in Spain. Net operating revenues increased 9 percent, excluding the impact of structural changes.

Chairman and CEO Neville Isdell said, "I am pleased with our performance in the quarter and year-to-date, with most key markets making a positive contribution. Once again we produced solid results and cycled 5 percent volume growth in the prior year quarter by successfully balancing performance across our global markets as well as our product portfolio.

"The effective execution of our strategy and investments in key marketing and innovation initiatives were instrumental in the 5 percent unit case volume growth, with 5 percent in carbonated beverages and 5 percent in noncarbonated beverages. We continue to achieve strong growth in emerging markets, including Brazil, China and Russia, as well as in other important markets across Latin America. Europe had a strong quarter following successful World Cup promotions and generally favorable summer weather. At the same time, we have started the recovery in Japan and are addressing the softness in North America. We remain committed to achieving acceptable, long-term performance in these key markets.

Operating income in the quarter increased 11 percent; 8 percent excluding items impacting comparability. Items impacting comparability negatively affected operating income for the third quarter by $39 million in 2006 and by $85 million in 2005. Currency had a slight positive impact on operating income in the quarter. The Company repurchased $1.2 billion of its stock year-to-date and currently intends to repurchase a total of $2.0 to $2.5 billion of its stock for the full year.

Unit case volume increased 5 percent in the third quarter, cycling 5 percent in the prior year quarter, and increased 4 percent year-to-date. The unit case volume increase in the quarter was led by 7 percent growth in the International Operations, reflecting double-digit growth in key emerging markets, including Brazil, Argentina, east and central Africa, central and eastern Europe, China, Russia, Turkey and the Middle East. Western Europe delivered solid unit case volume growth as performance continued to improve. Offsetting these results were unit case volume declines in Japan, North America, and the Philippines. Brand acquisitions benefited international unit case volume growth by 1 percent in the quarter.

The Company continued to deliver growth in carbonated beverages, which increased unit case volume 5 percent in the quarter - the highest growth since 2000. Key brands drove the results with Trademarks Coca-Cola, Sprite and Fanta growing unit case volume 3, 6 and 7 percent, respectively, in the quarter.

In noncarbonated beverages, Trademarks POWERade and Dasani continued their strong performance in the quarter. Trademark POWERade increased unit case volume 7 percent, cycling 28 percent growth in the prior year quarter, and Trademark Dasani increased unit case volume 18 percent, cycling 37 percent growth in the prior year quarter. Additionally, high single-digit growth in Trademark Minute Maid also contributed to noncarbonated beverage growth.