Coca-Cola Co said Tuesday that second-quarter sales were weaker than expected as global economic weakness and cool weather crimped the consumption of soft drinks, sending its shares down more than 2 percent.
The company said sales volume rose 1 percent, which was below its expectations, and cited slow economies in Europe, Asia and Latin America. It also said historically wet and cold weather across various regions curbed sales of soft drinks and overall consumer spending. Sales volume measures the amount of drinks sold.
Coke Chief Executive Muhtar Kent said he believes the company’s performance will improve in the second half, even though foreign exchange rates are expected to hurt earnings by 4 percent. The company’s prior view was for a 2 percentage point hit.
Quarterly net income dipped to $2.68 billion, or 59 cents per share, from $2.79 billion, or 61 cents per share, a year earlier.
Excluding items such as restructuring charges and tax matters, earnings were 63 cents per share, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.
Revenue dropped 3 percent to $12.75 billion, missing expectations of $12.96 billion. Foreign exchange rates hurt revenue by 2 percent.
By region, sales volume fell 1 percent in North America and 4 percent in Europe, but rose 2 percent in Latin America, 9 percent in Eurasia and Africa, and 2 percent in the Pacific region.
JP Morgan analyst John Faucher said volume results were was below his expectations in all regions except North America.
In China, volume was flat due in part to poor weather and an economic slowdown, which is expected to continue to take a toll throughout the year. Still, Coke expects growth to return in the second half as it “evolves” its strategy in China. It did not elaborate.
Rival PepsiCo Inc (PEP.N) agreed in late 2011 to sell its interest in 24 soft drink bottlers in China to Tingyi Holding Corp (0322.HK) after it had lost money amid soaring raw material costs and intense competition with Coke. At the time, Coke’s share of the Chinese market was more than triple that of PepsiCo.
Coca-Cola shares fell 97 cents, or 2.4 percent, to $40.05 in morning trade.
Coke shares had gained 5 percent in recent weeks, producing a price-to-earnings ratio of 18.7, according to Thomson Reuters data, slightly higher than the sector’s average multiple of 18.5.