By Cam Wood
May 29, 2008, Atlanta – Soft drink bottler Coca-Cola Enterprises Inc.
said Wednesday weak sales trends in the U.S., especially on some
20-ounce beverages, will likely lead to a decline in its second quarter
earnings and may make it difficult to meet its 2008 profit guidance.
May 29, 2008, Atlanta – Soft drink bottler Coca-Cola Enterprises Inc. said Wednesday weak sales trends in the U.S., especially on some 20-ounce beverages, will likely lead to a decline in its second quarter earnings and may make it difficult to meet its 2008 profit guidance.
The announcement came as soft drink maker Coca-Cola Co., which owns a stake in the bottler, told investors soft volumes in the U.S. will be offset by strong international sales. Coca-Cola offered no specific earnings guidance.
The U.S. operating environment for most consumer products companies, including those that sell food and beverages, has been tough all year with consumers cutting back on spending. Soda companies have also struggled with a shift in consumer preferences in the U.S. away from soft drinks toward juice and water beverages.
Coca-Cola Enterprises said it now expects a mid to high single-digit decline in second quarter earnings per share.
In the 2007 second quarter, the company earned US$270 million, or 56 cents per share. Analysts surveyed by Thomson Financial were expecting a rise in profit to 61 cents a share for the quarter.
The bottler said its volume performance in the U.S. has continued to be affected by "weakening economic trends." Volume is an industry measure that represents the number of cases sold either directly or indirectly to consumers.
Higher-margin 20-ounce packages of sparkling beverages and water, in particular, negatively affected operating income in the quarter.
The bottler said it will update its full-year guidance in July. The company expects to earn between $1.50 and $1.55 per share.
Chief Executive John F. Brock said meeting that guidance will be "challenging if current economic and market trends do not improve."
Analysts polled by Thomson Financial expect 2008 profit of $1.51 per share.
Goldman Sachs analyst Judy Hong said in a note to investors the announcement implies weak Memorial Day sales "and casts a more pessimistic outlook on the critical summer selling season, where bottlers make most of their money."
She added that it appears the bottler has not seen any benefit from economic stimulus checks that have poured into bank accounts and mailboxes since the end of April.
Coca-Cola, meanwhile, said its business has also been affected by weak volumes in North America. The company does not release specific guidance, but it rushed to reiterate that its international business, which makes up more than 80 per cent of the company's operating income, will offset any weakness in the U.S.
Source: The Associated Press