Georgia firms' earnings reflect still-rocky economy

By Péralte C. Paul

The Atlanta Journal-Constitution

UPS says the economy is turning the corner, given its better-than-expected results in the fourth quarter.

"It looks like this recession is finally over," Scott Davis, the shipping giant's chairman and chief executive, said in a conference call with analysts earlier this month.

But most of Georgia’s other big public companies aren’t necessarily ready to join in the celebration.

With the fourth quarter and full-year earnings season done, most of Georgia’s 10 largest companies turned a profit. They got there by different means, with some citing internal cost-cuts and other controls, while others saw increased sales.

Even so, for 2010 caution is the key word for many of the companies -- especially domestically -- as the U.S. economy struggles out of one of the worst economic downturns since the Great Depression.

Coca-Cola Co. said overseas growth helped buoy its results. The company, which reported that profits rose 18 percent to $6.82 billion for all of 2009, said sales in China, Mexico and India as well as Australia, Vietnam and others, added to the bottom line.

Coca-Cola Enterprises, the world's largest bottler of Coke products, had a similar result.  Europe provided the boost for company's profit even as North America was flat.

The bottler, which on Thursday said it would sell its North American bottling operations to Coca-Cola, will look to Europe and the rest of the world for growth in 2010 that's not expected to rise past the single digits.

Aflac, the supplemental insurer, saw profits rise, too, thanks to Japan, which forms the bulk of its business.

The company expects its Japan business to be strong in 2010 but it's taking a cautious stance with the U.S., which fell short of Aflac's sales expectations in 2009.

Foreign operations didn't necessarily lead better results for all companies.

Duluth-based AGCO, the farm and agricultural equipment maker, said its profit fell nearly 65 percent for the year.

The company, which had done a number of strategic acquisitions over the years that expanded its worldwide reach, expects economic conditions to remain weak this year.

Global demand, the company predicts, will be particularly weak in the first half of this year in Europe and North America.

It's no surprise that companies have mixed outlook given the current economy, said Al Koch, managing director of Alix Partners, a global corporate turnaround and consulting firm.

"There does seem to be some improvements in operating results in what appears to be a fairly tepid recovery," said Koch, who led General Motors Corp. through its Chapter 11 bankruptcy.

"We think that slow recovery is likely going to continue and that companies' revenue lines are going to experience a long, painful slow recovery," said Koch, who is chief executive of Motors Liquidation Corp., or "Old GM."

The residential real estate market, which had suffered as the economy unraveled, is showing a few signs of improvement, he said.

But the commercial real estate sector is having an ever-growing number of problems and unemployment remains high.

And except for companies with the most sterling of balance sheets, credit remains hard to get.

That might not necessarily be an issue for Georgia's big firms. But many companies borrowed plenty of money when public markets where free-flowing with cash, Koch said.

Much of that debt is going to have to be refinanced over the next couple of years at a time when corporate earnings are lower. Lower earnings means companies have less leverage to refinance, he said.

"Companies have a little time to get on top of the problem and make sure that their operations are fine-tuned as much as they could and to not count on the revenue lines coming back," Koch said. "There is a real crunch coming. The unanswered question is how soon it will occur."