Coke Profit Easily Beats Forecasts

ATLANTA – Coca-Cola Co. (KO) 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 in key markets, said the second-quarter results showed it was getting back on track to delivering long-term sustained growth.

Reigniting sales of Coca-Cola Classic (search) 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.

Coke Chairman and Chief Executive Neville Isdell (search), 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.

"We still have considerable work ahead of us in the U.S. and in markets like Germany, the Philippines and, in particular, India, as well as to improve our performance in the areas of innovation and marketing," Isdell said in a statement accompanying the results.

Coca-Cola earned $1.72 billion, or 72 cents a share, in the second quarter, 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 a 4 cent-per-share gain from the settlement of a lawsuit related to high fructose corn syrup.

Analysts on average had forecast a profit, excluding items, of 64 cents per share on sales of $6.3 billion, according to Reuters Estimates.

The unexpectedly strong results came amid a continued restructuring of Coca-Cola's operations that is designed to boost the company's performance in its more than 200 markets around the world.

Coca-Cola is hoping that a renewed focus on innovation will improve its fortunes in 2005. A version of Diet Coke sweetened with the sugar substitute Splenda (search), flavored versions of Dasani bottled water and an energy drink called Full Throttle are among the new drinks recently unveiled.

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 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 poor results in India and the Philippines.