Cost cuts help Coca-Cola’s profits

New York – Coca-Cola, the world’s largest soft-drink company, posted fourth-quarter profit that beat analysts’ estimates after price increases and a $3-billion cost-cutting programme helped improve margins.

Earnings were 38 cents a share in the period, excluding some items, the Atlanta-based company said in a statement on Tuesday. Analysts estimated 37 cents on average.

Keeping a tighter lid on expenses helped Chief Executive Officer Muhtar Kent cope with the crushing impact of the strong US dollar, which has reduced the value of Coca-Cola’s sales in other countries. The CEO reduced expenses, revamped the company’s bottling system, and introduced more package sizes last year to counter declining soda consumption in the US and other major markets. The soda maker also was helped by higher prices and low commodity costs, even as some overseas economies showed signs of faltering.

“The company is clearly working hard to realign their business model with the current reality that they’re facing,” said Vivien Azer, an analyst at Cowen & Company. “The volume environment still feels a bit lacklustre to me.”

Coca-Cola shares climbed 1.5 percent to $43.30 at the close of trading in New York. That followed 1.8 percent gain for the stock last year.

The currency impact contributed to an 8 percent decline in operating revenue, which came in at $10 billion last quarter. The company also had six fewer days in the period than a year earlier. Analysts had estimated $9.89 billion on average, according to data compiled by Bloomberg.

Coca-Cola also said on Tuesday that it will complete the sale of its wholly owned US bottling plants three years early and is widening the program to sites in China.

China operations

Franchise partners will run all bottling facilities in North America by the end of 2017, including all cold-fill production sites, the company said. Coca-Cola also reached a preliminary agreement for partners Cofco and Swire Beverage to take over bottling operations it owns in China.

Coca-Cola has been shifting US bottling plants to franchise operators since 2013, and outlined a disposal of nine sites in September. The strategy lets Coca-Cola focus on more the profitable business of producing drink concentrates and syrups.

“The acceleration of our global refranchising marks a step change in our efforts to refocus the Coca-Cola on its core business of building strong, valuable brands and leading a system of strong bottling partners,” Kent said.

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