The Wall Street Journal-20080214-Coke Gets Lift From Abroad Amid U-S- Weakness

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Coke Gets Lift From Abroad Amid U.S. Weakness

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Coca-Cola Co.'s international sales helped the global beverage giant weather the weakening U.S. economy to post a stronger-than-expected 79% increase in fourth-quarter profit.

The Atlanta company's important North American business, its largest market by revenue, overcame declining sales in Coke's core sodas only as a result of last year's $4.1 billion acquisition of Energy Brands Inc.'s Glaceau enhanced water. The year-earlier results were held back by a charge of 23 cents a share.

Coke's U.S. sales came under particular pressure as cash-strapped consumers scrimped on eating out, triggering a 3% drop in restaurant sales. Declines in soda sales have generally accelerated over the past year in North America, amid price increases and growing competition from newer beverages in niches that make up a smaller portion of Coke's portfolio. Analysts polled by Thomson Financial had expected earnings of 55 cents a share.

Sales of Glaceau drinks contributed two percentage points of volume growth. Without those brands, Coke's North American volume would have slid 1%. Operating income for the North American unit fell 4%.

The picture was much brighter outside North America, where sales were strong enough to push the company to 5% global volume growth. That concerned some analysts and investors who had expected faster growth, but Coke said a decision to stop promoting low-margin water brands in countries such as China and Indonesia accounted for the difference. The company derives about 80% of its global profit from markets outside North America. Its European Union, Latin American and Pacific divisions were the top three contributors to operating income in the quarter.

In a conference call, Coke Chairman and Chief Executive, E. Neville Isdell, said improved soda sales in international markets, the introduction of new brands, productivity initiatives and other elements of a turnaround effort the company has had under way in recent years "are such that we are going to be able to manage what may be a half a percent decline at the worst in terms of global growth."

Coke shares slipped 53 cents to $59.39 in 4 p.m. New York Stock Exchange composite trading.

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Andrew Edwards contributed to this article.