Coca-Cola boosts savings target; sees smaller profit drop

[April 25, 2017]  By Sruthi Ramakrishnan

(Reuters) - Coca-Cola Co on Tuesday expanded its savings target and said it now expected the decline in 2017 adjusted profit to be smaller than it previously forecast.

The company's shares were up marginally at $43.43 in premarket trading on Tuesday.

Coca-Cola also reported a smaller-than-expected quarterly profit, mainly due to higher costs related to refranchising its North America bottling operations.

"We are not too worried about this quarter's miss," RBC Capital Markets analyst Nik Modi wrote in a note.

"The important thing is that KO is raising its cost-saving estimates and we believe there is more to go."

Coca-Cola said it was increasing its cost-cutting target by $800 million in annualized savings and now expects to save $3.8 billion by 2019.

The majority of the additional savings are expected to come from cost cutting in the company's supply chain, marketing and from its new operating model, which classifies its product portfolio under five new units.

Coca-Cola said on Tuesday it expects full-year adjusted profit to decline 1-3 percent, compared with the 1-4 percent decline it forecast in February.

The company is offloading much of its low-margin bottling business to cut costs amid falling demand for carbonated beverages in North America.

Coca-Cola had warned in February that the refranchising was turning out to be costlier than previously anticipated.

The company said it recorded a charge of $84 million related to the refranchising in North America.

Bottles of Coca-Cola are pictured in a cooler during a news conference in Paris, France, April 20, 2017. REUTERS/Benoit Tessier

Global soda sales fell 1 percent in the first quarter ended March 31, the company said.

Coca-Cola's chief executive of more than eight years, Muhtar Kent, will step down next month and will be succeeded by Chief Operating Officer James Quincey, who is credited with several recent changes to help the company cut its dependence on sugary drinks.

Net income attributable to the company's shareholders fell to $1.18 billion, or 27 cents per share, from $1.48 billion, or 34 cents per share, a year earlier.

Excluding items, the company earned 43 cents per share.

Revenue fell 11.3 percent to $9.12 billion, declining for the eighth straight quarter.

Analysts on average had expected earnings of 44 cents per share and revenue of $8.87 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sriraj Kalluvila)

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