The Coca Cola Company (KO) reported modest results for the third quarter with earnings of 81 cents per share. Earnings were in-line with the Zacks Consensus Estimate and flat year-over-year.

Net operating revenues for the quarter declined 4% year-over-year, driven by a 6% negative impact from currency translation and a 1% adverse impact from a structural change. This was partially offset by 2% increase in concentrate sales and a 1% benefit from pricing and product mix.

Worldwide unit case volume increased 2% in the quarter, aided by a 4% improvement in international unit case volume and 2% growth in the Coca Cola trademark brand. The emerging markets of India and China grew an impressive 37% and 15%, respectively. In addition, strong unit case volume growth was observed in other key markets including Eurasia & Africa, Latin America and Pacific. Europe posted a 2% volume decline, while North American volume declined 4%.

In Europe, volume declined due to the tough macro economic environment. While in North America, in addition to the challenging environment, aggressive competitive pricing within the non-carbonated beverage category added to the decline in volume. Furthermore, in North America, many consumers for health reasons prefer juices and teas instead of soft drinks.

Carbonated soft drink (CSD) case volume increased 1% during the quarter. Non-carbonated beverage (NCB) volume grew 7% driven by strong growth across the portfolio, including juices and juice drinks, sports drinks, teas and water brands. In North America, NCB’s were flat year-over-year.

Gross margins for the quarter contracted 49 basis points (bps) to 63.5% versus 64.0% in the prior-year quarter. The decline was primarily attributable to adverse currency impact of currency translation and impact from structural changes related to bottling investments. The operating margin for the quarter expanded 64 bps to 26.7% versus 26.1% in the prior-year quarter. The increase was attributable to lower selling, general and administration expenses.

The company had cash and cash equivalents of $8.8 billion and a debt-to-capitalization ratio of 17%.

During the first nine months of 2009, the company topped the nonalcoholic ready-to-drink industry in most of its key markets for the ninth consecutive quarter, thereby driving further global volume and market share gains. Management states that its investments in key growth markets such as China, Mexico, India and Brazil contributed to the results.

The company is on track to achieve the $500 million target in annualized savings by 2011 and expects to deliver more than half of the savings by the end of 2009.

Coca Cola also rolled out its 2020 Vision, which is the roadmap for the company to grow along with its worldwide bottling partners. Management stated that the 2020 Vision roadmap is improving clarity and focus of the global business. It therefore expects better utilization of growth opportunities, going forward.
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