Coca-Cola Co. (KO), the world’s largest beverage company, said third-quarter profit rose as sales volumes advanced in North America and the European business began to rebound.
Net income rose 5.9 percent to $2.45 billion, or 54 cents a share, in the three months ended Sept. 27, compared with a year earlier, Atlanta-based Coca-Cola said today in a statement. Excluding some items, profit was 53 cents a share, in line with the average of 16 analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Muhtar Kent fought back in the quarter against persistent consumer uncertainty in developed nations and what he called “increasing volatility across emerging markets” by strategically raising prices and getting more consumers to grab a drink on the go. Kent said he still expects the company and its bottlers to reach $200 billion in global revenue by 2020, double that generated in 2010.
“Muhtar and his team are continuing to succeed at their game plan even though the economy in some emerging markets, South America and some parts of Europe continue to create near-term challenges,” Thomas Mullarkey, an analyst for Morningstar Inc. (MORN) in Chicago, said today in a telephone interview.
Beverage sales declines in Europe improved, sliding 1 percent compared with a 4 percent fall in the second quarter. In North America, sales rose 2 percent after slipping 1 percent in the previous quarter.
During a conference call today with reporters, Kent expressed concern about a prolonged U.S. government shutdown and the fiscal deadlock, calling it a “bad dream,” while expressing optimism that lawmakers can reach a deal.
“If it continues there’s no question that the negative consumer sentiment is most likely going to impact businesses of all nature,” Kent said. “Everyone is guardedly optimistic that logic is going to prevail and that we will move forward in a constructive, collaborative way for the benefit of the country and also the benefit of the world because this obviously impacts the U.S. immediately and directly, but impacts the world also.”
Coca-Cola declined 0.7 percent to $37.66 at the close of trading in New York. The shares have gained 3.9 percent this year, compared with an 18 percent advance for PepsiCo Inc. (PEP) and a 19 percent rise for the Standard & Poor’s 500 Index.
Revenue declined 2.5 percent to $12.03 billion. Analysts estimated $12.05 billion, on average. The company also said fluctuating currency will decrease comparable operating income in the fourth quarter by as much as 6 percent.
Mexico Soda Tax
Global sales volume grew 2 percent, less than the 2.9 percent average of three estimates compiled by Bloomberg. In Latin America, where Coca-Cola faces a proposed tax in Mexico on sugary soda, sales volume was little changed while Brazil posted a 1 percent decline.
Mexico President Enrique Pena Nieto has proposed a 1 peso per liter tax to raise revenue. Coca-Cola’s Mexican unit has said the tax proposal is “unfair.”
Kent called such a tax “discriminatory” during the call and said he is not resigned to the proposal being passed. He declined to say how it would impact Coke’s business or what plans have been made to offset any effect on sales.
“These regressive taxes certainly do not really work,” Kent said. “The consumers suffer. Retailers suffer.”
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