Coca-Cola estimates financial fallout of Japanese earthquake

By Guy Montague-Jones

- Last updated on GMT

Related tags Cost Coca-cola

Coca-Cola has put a figure on the likely impact on its finances of the earthquake and tsunami in Japan after publishing first quarter results that fell slightly below Wall Street expectations.

CFO Gary Fayard said Coca-Cola had been heading for volume growth of 3 to 4 per cent in Japan for the first quarter but the natural disaster pulled that figure back to 1 per cent.

Costing the Japanese disaster

In addition, one-off costs related to the tragedy added up to $81m in the quarter although damage to bottling operations was described as “minimal”. The cost figure includes a $31m reconstruction fund set up to aid rebuilding and relief efforts in the country.

Looking ahead to the full year, Fayard said the total impact on earnings per share is likely to be between $0.02 and $0.04.

The CFO revealed these figures during an earnings call that followed the publication of Coke’s first quarter results.

Highlights from the results include a 6 per cent increase in global volume and an 18 per cent increase in net income, which was boosted in the quarter by the acquisition of the North American bottling operations. But the profit figure was just under analyst expectations and shares in Coca-Cola dipped slightly as a result.

PET dominates cost worries

The stock market is particularly concerned about rising costs as Coca-Cola comes under pressure from higher prices for raw materials, especially PET.

Fayard told investors: “We’ve also seen our total company commodity costs exposure for this year increase by approximately $250 million to $300 million, primarily driven by continued rise in the price of PET.”

Coca-Cola said that it would have to increase the price of some of its products and sell drinks in smaller bottles for the same price in an effort to combat the higher input costs.

For example, the company is increasing the price of its refrigerated orange juices in North America by 6-9 per cent in April. This comes as orange concentrate prices on the futures market rise towards the peaks of 2006/2007 and 1989/1990.

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