Cost cuts, cheaper commodities help Coca-Cola top profit estimates | Reuters - Firstpost
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Cost cuts, cheaper commodities help Coca-Cola top profit estimates | Reuters

Updated: Feb 10, 2016 01:00 IST

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Coca-Cola Co reported a better-than-expected profit in the last three months of 2015, helped by aggressive cost-cutting and lower commodity costs.

The soda maker's revenue fell 8 percent, but surpassed analysts' average estimate, boosted by price hikes and the company's bet on smaller can and bottle sizes.

Coca-Cola's shares rose about 1 percent to $43.02 in morning trading on Tuesday.

The company, which is targeting $3 billion in annual savings by 2019, has been cutting costs through job reductions and selling some of its bottling operations and factories.

Coca-Cola said on Tuesday it would refranchise all its North America bottling operations by the end of 2017, three years earlier than expected, and also refranchise its bottling operations in China.

The refranchising would significantly reduce capital needs, while boosting margins and returns, the company said.

Coca-Cola's global sales volume rose 3 percent in the fourth quarter ended Dec. 31.

"In the United States, in particular, we have a price-pack architecture strategy promoting the mini cans and the 8-ounce glass bottles," Chief Financial Officer Kathy Waller told Reuters, adding that the strategy was doing well in the region.

The company is expanding the smaller-package strategy globally, Chief Operating Officer James Quincey said on a media call.

Sales in China slowed in the quarter, the company said. China, together with Mexico, Brazil and Japan, accounted for nearly a third of the company's 2014 global sales volume.

Coca-Cola's net operating revenue fell to $10 billion in the three months ended December, the third straight quarterly drop, largely due to a strong dollar, but beat analysts' expectation $9.91 billion.

Excluding the impact of acquisitions, divestitures and foreign currency, revenue declined 1 percent.

However, net income attributable to shareholders jumped nearly 61 percent to $1.24 billion, or 28 cents per share.

Selling, general and administrative expenses fell 9.2 percent to $3.94 billion.

Lower commodities costs also helped margins in the quarter, Waller said.

Sugar prices have been pressured due to expectations of a bumper crop in Brazil in 2016/17, while corn prices have been depressed due to a global glut.

Sugar and corn are the two main ingredients used by soft-drink makers.

Excluding items, the company earned 38 cents per share.

Analysts on average had expected earnings of 37 cents per share, according to Thomson Reuters I/B/E/S.

Coca-Cola on Tuesday forecast 2016 currency-neutral adjusted earnings growth of 6-8 percent per share. The company also plans to buy back $2 billion-$2.5 billion of shares this year.

(Reporting by Sruthi Ramakrishnan and Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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