By Chelsey Dulaney
Coca-Cola Co. posted better-than-expected profit and revenue in
its first quarter, despite stiff foreign-exchange headwinds in key
overseas markets and a 6% decline in Diet Coke volumes.
Shares of Coke, down 6.9% over the past three months, added 1%
to $41.20 in morning trading.
The maker of brands including Sprite soda and Minute Maid orange
juice had warned that 2015 would be a challenging year as it works
through a plan to cut $3 billion in costs and faces increasingly
health-conscious customers.
Chief Executive Muhtar Kent said in a news release Wednesday
that the company is beginning to see initial positive indicators
from changes to its business.
"However, we continue to view 2015 as a transition year as the
benefits from the announced initiatives will take time to fully
materialize amidst an uncertain and volatile macroeconomic
environment," he said.
Coke said its world-wide soda volumes and noncarbonated beverage
volumes both grew 1% in the latest quarter. Growth in its Sprite
and Coke Zero brands of 4% and 5%, respectively, helped to offset a
6% drop in Diet Coke volume.
Soda volumes in North American fell 1%, offsetting a 2% increase
in noncarbonated beverage volumes. Overall, volume was flat in the
division.
In a move that has helped to offset declining soda volumes, Coke
raised prices aggressively in the U.S. during the second half of
2014, capitalizing on a rebounding economy, falling unemployment
and rising wages.
On a conference call with analysts, Mr. Kent described the
company's outlook as "cautious," citing sluggishness in Europe,
where volumes edged up 1% overall, and Japan, which logged a low
single-digit volume decline in the latest quarter.
Mr. Kent described commodity costs as "stable and benign" and
said the company is on track to deliver at least $500 million in
savings this year.
Coke, like other companies, is seeing currency fluctuations dent
its earnings. Coke generates most of its profit abroad and warned
in February that weakening foreign currencies could drag down
pretax profit by 7 to 8 percentage points in 2015. Since then, the
dollar has strengthened further against key currencies including
the Brazilian real and the euro.
Coke unveiled a $3 billion cost-cutting program in October, as
the maker of Sprite, Minute Maid and Powerade warned it would miss
profit targets after sales slowed across much of the world. The
cost-cutting program includes a shift to zero-based budgeting,
layoffs and redirecting savings to stepped-up marketing after
missing revenue targets two straight years.
Overall, for the period ended April 3, the company posted
earnings of $1.56 billion, or 35 cents a share, down from $1.62
billion, or 36 cents a share, a year earlier. Excluding items,
per-share earnings were 48 cents.
Revenue inched up 1.3% to $10.71 billion.
Analysts surveyed by Thomson Reuters had projected 42 cents a
share in earnings and $10.66 billion in revenue.
Organic revenue, which strips out foreign currency impacts, grew
8%, driven by concentrate sales growth.
Mike Esterl contributed to this article.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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