Andina's Quiet Fizz

Andina Bottling's (NYSE: AKO-A  ) stock has lacked luster since I selected it for our international investing newsletter, Motley Fool Global Gains. The company has been solid, however. And this week's Q2 earnings report shows exactly why the discrepancy between stock price and performance doesn't bother me at all: Andina, Chile's major bottler of Coca-Cola (NYSE: KO  ) products, is well-positioned to keep generating cash from an increasingly affluent population base in Chile, Brazil, and Argentina.

For the first half of fiscal year 2007, case volume sales increased 6%, with the 10.8% jump in waters, juices, and beers outpacing the 5.6% growth in more traditional soft drink categories. Thanks to favorable exchange rates and "price adjustments," the net sales figure came in 12.8% higher, at $563.5 million.

However, commodity prices continued to gnaw at Andina, as they have at peers such as Mexico's Coca-Cola FEMSA (NYSE: KOF  ) and FEMSA (NYSE: FMX  ) . Price per case increased 3.3% from a combination of sweetener and concentrate increases. SG&A expenses increased even more, a result of higher labor costs and advertising initiatives.

Still, operating earnings are up 17.6% over the first half of last year, with the margin up 60 basis points to 6.4%.

If you're yawning by now, that smells like opportunity to me. There's nothing too exciting or sexy about a South American Coke bottler, but that's exactly why I like this stock. While everyone else is out there trying to root up some kind of Chinese or Indian Wal-Mart (NYSE: WMT  ) or Cisco (Nasdaq: CSCO  ) or [insert well-known superstock here], Andina moves quietly along.

Its initiatives in Brazil and Argentina are producing faster growth in those countries, and if you look closely at the financials, you see operating margins in those areas are still inferior to those in Chile. But as those businesses grow, scale, and mature, they should provide the kind of margin expansion that powers earnings and cash production. Anyone looking for a cool, tasty, steady cash producer to help anchor an international portfolio would do well to pop the top at Andina and see what's inside.

Andina Bottling is a selection of Motley Fool Global Gains. Join Seth and the rest of the Global Gains analysts to get their latest stock picks from around the world.

Wal-Mart and Coca-Cola are Inside Value recommendations.

At the time of publication, Seth Jayson, a top-10 CAPS player, had shares of FEMSA, but no positions in any other company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.