US: CCE income up despite US volumes
The soft drink bottler Coca-Cola Enterprises today reported fourth-quarter net income of US$128m, or 28 cents per diluted common share. Operating income grew to US$346m in the fourth quarter, up by 38% versus prior year results.
Full-year 2003 net income totaled US$674m, or $1.46 per diluted common share. Operating income totaled US$1,577m in 2003, an increase of 16%.
The company said that 2003 results included favourable items consisting of a gain on the sale of a hot-fill manufacturing facility recorded in the first quarter, insurance proceeds received in the fourth quarter, favourable purchase accounting adjustments, and net favourable tax items.
Adjusting for these items and for favourable tax items recorded in 2002, CCE generated net income per diluted common share of 17 cents, up 31%.
The full year results were driven by strong growth in Europe, consistent pricing initiatives throughout CCE's territories, and favourable foreign currency translations.
"By every financial measure, the results of our company continue to improve, with strong earnings per share growth, increasing levels of free cash flow, improved returns on invested capital, and reduced net debt levels," said Lowry F. Kline, chairman of the board. "We are achieving this improved performance through our strong commitment to value creation, including enhanced brand building activities and a clear, company-wide strategy of revenue management.
"In 2004, we will build on these results by reinforcing our value-oriented strategic direction, increasing our operating efficiencies, and further strengthening our solid partnership with The Coca-Cola Company," Kline said.
Consolidated physical case bottle and can volume decreased 1% on a comparable basis for the fourth quarter, and increased by 1½ percent for full year 2003. North American volume was down by approximately 1% in the fourth quarter, and flat for the full year.
"Our full-year 2003 volume results in North America were characterized by growth in diet soft drink brands, including diet Vanilla Coke, strong sales of Dasani, and lemon-lime category growth from the introduction of Sprite Remix. This offset slower sales of regular soft drinks and the comparisons resulting from the introduction of regular and diet Vanilla Coke in 2002."
In Europe, volume was down by approximately 1.5% in the fourth quarter as promotional activity fell. For the full year, European volume increased by 5.5%, reflecting what the company called "record-setting hot weather during the summer months", the success of local marketing programs, and new brand introductions, including Vanilla Coke and Diet Coke/Coke light with Lemon.
"Our dedication to revenue management was essential to our success for the year, and we will enhance this strategic commitment in 2004," said John R. Alm, president and chief executive officer. "Strong, popular brands, in the right package, make revenue enhancement possible and sustainable through a combination of rate and mix. It is vital that we continue to build our brands with even higher levels of demand, creation, innovation and marketplace execution.
"We plan continued product and package development, already demonstrated by the introduction of Diet Coke with Lime, as well as significant brand-building activities in support of our existing brands, including the NCAA Final Four and a unique summer initiative," Mr. Alm said. "We believe these efforts will drive growth and increase value in the year ahead, benefiting customers and consumers in North America and Europe."
Full-year 2004 earnings per diluted common share are now expected in a range of $1.42 to $1.46. 2004 operating profit is expected to increase 5% to 6%.
CCE said 2004 operating income expectations include the impact of a significant increase in pension expense, which will negatively impact 2004 growth by approximately 3%.
Full-year 2004 physical case bottle and can volume growth is expected to total approximately 1.5% in both North America and Europe.
"While expected volume growth in Europe is below our long-term trends, our outlook for 2004 reflects our strategic decision to develop a new water portfolio with The Coca-Cola Company, combined with hurdling the volume generated by last summer's record-setting hot weather. We remain committed to a long-term growth rate of 4% to 6% for our European territories," CCE said.
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