Coca-Cola misses on Japan earthquake disruptions

Even though profit is up 18%, shares are down as the company comes in just below what analysts hoped to see. With video.

By Kim Peterson Apr 26, 2011 10:33AM
Coca-Cola (KO) has a pretty significant manufacturing and vending presence in Japan, and the disruptions there were felt across the company in the first quarter.

The company missed analyst expectations for profit and revenue as a result, and the stock dropped 2.5% in morning trading to $66.06. "The high exposure to Japan remains a major uncertainty," one Credit Suisse analyst wrote in a note this week, according to Bloomberg.

But even though Coca-Cola fell short of the mark, the company's first-quarter profit still grew 18%, largely because of its acquisition of the North American bottling operations from Coca-Cola Enterprises (CCE). Profit was $1.9 billion, or 82 cents a share, up sharply from $1.61 billion, or 69 cents a share, in the year-ago period.

Post continues after this analyst interview about Coca-Cola's earnings:
Excluding certain costs like restructuring charges, profit was 86 cents -- just a penny shy of what analysts were expecting. Revenue took a 40% leap to $10.52 billion, again a bit less than the $10.57 billion analysts wanted to see.

Coke's operating profit rose by 3% in the quarter, helped along by the weaker dollar, while gross margin fell to 62.5% from 66.2%.

The company's operations in Japan represent more than 10% of operating profit, Bloomberg reported. Coke's chief executive, Muhtar Kent, has offered more than $30 million in aid after the March 11 earthquake and tsunami.

Coca-Cola is recovering nicely this year, boosting sales volumes in North America for four straight quarters, Bloomberg reported. Worldwide volume grew 6% in the first quarter. But the increase in commodity and oil prices, along with soaring costs for raw ingredients, are taking a toll for both Coke and rival PepsiCo (PEP), and Coke has raised prices in North America. Pepsi reports earnings on Thursday.

Coca-Cola relied on emerging markets for much of its volume growth. The Eurasia and Africa region saw 8% growth, followed by 7% in Latin America, 5% in the Pacific and 1% in Europe. In North America, growth was 2% excluding cross-licensed brands primarily under the Dr Pepper Snapple Group (DPS).

The "still beverage" category, which includes juice, sports drink, tea and bottled water,  was a star in the quarter. Worldwide volume rose 11% in the quarter, with 12% growth coming from overseas and 8% growth in North America. Minute Maid Pulpy, which originated in China, saw 25% growth.

Coca-Cola will celebrate its 125th birthday on May 8.
Apr 26, 2011 12:20PM
It's tough to sit down and have a Coke when part of your country has been flushed down a rat hole and your neighbor is glowing green.
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