The soft drink bottler Coca-Cola Enterprises has reported second-quarter 2004 net income of US$203m. Year-to-date net income totalled US$307m.

However, second quarter operating income reached only US$451m, a 15% fall on the same period last year as poor weather across Europe took its toll.

Excluding the US$41m of higher cost of sales, comparable operating income declined 7% for the second quarter and increased 14% for the first six months, the comany said.

"Our operating performance continues to reflect balanced volume and pricing growth in North America, while our European operations are experiencing a significant, weather-related volume shortfall that is mitigating the benefits of solid pricing growth and cost management initiatives," said Lowry F. Kline, chairman of the board.

"Our European results and higher than expected health care expenses in North America contributed to second quarter financial results below our expectations. Though we expect a difficult third quarter due to continued volume related challenges, we believe favourable North American operating dynamics and improved trends in Europe later this year will enable us to achieve our operating income target for the full year."

Second-quarter physical case bottle and can volume decreased 1% versus prior year, while volume for the first six months was flat versus prior year.

Growth in North America was 1% for the second quarter and first six months as diet soft drink brands, Dasani water and Powerade continued to achieve solid increases.

In Europe, the unfavorable summer weather resulted in volume declines of 6.5% for the second quarter and 3% for the first six months.

"Cool, rainy weather continues to significantly affect European volume, heightening the negative impact of comparisons to record growth achieved during the extraordinary summer heat of a year ago," said John R. Alm, president and chief executive officer. "The underlying performance of our North American business was sound in the quarter as we achieved a solid combination of volume and pricing growth. However, we expect soft North American retail trends, slower sales of regular soft drinks and European volume performance to result in third quarter volume and profit below prior year.

"We believe financial trends will improve in the fourth quarter. In North America, this improvement will come as a result of price increases planned for this fall and our brand building initiatives, including Coca-Cola C2, new Minute Maid light packaging, and diet Sprite Zero," Mr. Alm said. "In Europe, fourth-quarter results will benefit from additional marketplace initiatives and promotions as well as easier comparisons to prior year."

The company says it now expects full-year 2004 earnings per diluted common share at the low end of its current range of $1.48 to $1.52, excluding nonrecurring items, as its forecasts for interest expense and diluted shares have increased.