Coke profit rises

Coca-Cola Co on Thursday reported a 9-percent jump in quarterly net income, easily beating Wall Street forecasts due to strong soft drink sales in China and Mexico and continued growth in North America, its largest market. The world's largest soft drink maker, which has rolled out a flurry of new drinks in a bid to boost its business, said it took market share from its rivals in the soft drink, bottled water and sports drink categories in the second quarter.
Reigniting sales of Coca-Cola Classic and other core soft drink brands has been a top priority since the Atlanta-based company embarked on a sweeping restructuring of its global operations more than five years ago.
Coca-Cola shares rose 2.2 percent in early trading.
Legg Mason analyst Mark Swartzberg, who has a "buy" rating on Coke, said the results demonstrated that Chairman and Chief Executive Neville Isdell had "begun to effectively transform Coke and restore its capacity to grow."
But Isdell, who has been candid about the need to improve marketing and innovation since he took over Coke's reins a year ago, cautioned that significant challenges remained.
"2005 is still a transition year," Isdell told analysts in a conference call. He noted that the company was taking steps to improve its poor performance in several important markets, such as India and the Philippines.
In the second quarter Coke earned $1.72 billion, or 72 cents a share, compared with $1.58 billion, or 65 cents a share, a year earlier. Revenue increased to $6.31 billion from $5.96 billion.
The earnings included 4 cents per share in one-time gains. The company also benefited from positive currency exchange rates in the period.
Analysts on average had forecast a profit, excluding extraordinary items, of 64 cents per share on sales of $6.3 billion, according to Reuters Estimates.
The unexpectedly strong results followed on the heels of the rollout of new drinks that Coke hopes will boost consumer interest, especially in North America, its largest and most important market.
A version of Diet Coke sweetened with the sugar substitute Splenda, flavoured versions of Dasani bottled water and an energy drink called Full Throttle are among the new drinks.
One of the keys to the company's future is capturing more consumers who have moved away from sugary soft drinks to diet versions or to healthier low-or no-calorie beverages such as water and orange juices with reduced sugar.
Doing so would go a long way toward driving up Coke's sales by volume, which rose a healthy 5 percent overall in the second quarter. Sales were boosted by 15-percent growth in the company's North Asian, Eurasian and Middle East markets.
Volumes were up 1 percent in North America, Coke's most mature market, and 9 percent in Latin America. Sales in the East Asian, South Asian and Pacific Rim markets slumped 4 percent, hurt by a 14-percent drop in India.
Shares of Coke were up 92 cents at $44.25 in early trade on the New York Stock Exchange.