Coca-Cola net income climbs 14% in third quarter; sales gain 7%

by Josh Sosland
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Strong results posted despite softness in North American business

ATLANTA — While North American businesses were soft, solid aggregate results were achieved by The Coca-Cola Co. in the third quarter ended Sept. 29.

Net income in the third quarter was $1,460 million, equal to 62c on the common share, up 14% from $1,283 million, or 54c per share, in the third quarter last year. Net sales were $6,454 million, up 7%.

Neville Isdell, Coca-Cola chief executive officer, said he was "pleased" with the company’s results, noting that most key markets made positive contributions.

"Once again we produced solid results and cycled 5% volume growth in the prior year quarter by successfully balancing performance across our global markets as well as our product portfolio," he said. "The effective execution of our strategy and investments in key marketing and innovation initiatives were instrumental in the 5% unit case volume growth, with 5% in carbonated beverages and 5% in noncarbonated beverages."

He said strong results were achieved in emerging markets, including Brazil, China and Russia, as well as in other Latin American markets.

"At the same time, we have started the recovery in Japan and are addressing the softness in North America," Mr. Isdell said. "We remain committed to achieving acceptable, long-term performance in these key markets. I remain confident that we are taking the necessary actions to create long-term sustainable growth and value for shareowners."

Operating income in North America was $383 million, down 6% from the third quarter of 2005. Sales were $1,809 million, up 4%. Coke attributed a 1% unit volume decrease in North America to a drop in warehouse-delivered water "resulting from the strategic decision to refocus resources behind the more profitable Dasani business."

Operating income in North America was down because of a 2% volume decline, higher input costs and unfavorable product mix, partly offset by higher prices. Carbonated beverage unit volume fell 1% during the quarter, though the company said its market share grew.

"Coca-Cola Zero unit case volume increased in excess of 30 percent and successfully cycled its launch in the summer of 2005," the company said. "Vault and Vault Zero continued to perform well particularly in immediate consumption, and energy drinks gained category share as distribution and display activity increased across the portfolio."

In the case of noncarbonated beverages, volume rose 3% (excluding warehouse delivered water), bolstered by a double-digit gain in Dasani. The company enjoyed a mid-single-digit gain in Powerade, following a 30% jump in sales in the third quarter last year. Juice unit volume declined mid-single digits.

In the nine months ended Sept. 29, Coca-Cola net income was $4,402 million, or $1.87 per share, up 10% from $4,008 million, or $1.67. Net sales were $18,156 million, up 3%.

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