Coca-Cola Enterprises today reported a fall in first-quarter 2005 net income to US$46m, or 10 cents per diluted share. The results compare to net income of US$104m, or 22 cents per diluted share in first-quarter 2004.

Operating income totalled US$220m for the first quarter, down 28% versus prior year.

The company said the results reflected two fewer selling days in 2005, lower volume in the company's European territories as well as the impact of the high cost of goods environment. These factors were partially offset by the benefit of the company's cost control efforts which resulted in operating expenses below prior year.

"We achieved earnings at the low end of our guidance as we worked through a period of weak category performance and high cost of goods increases. With the operating flexibility created by our cost control efforts, we can maintain our full-year outlook," said Lowry F. Kline, chairman of the board. "We believe that upcoming product introductions and a strengthening revenue management environment will drive improving results for the balance of the year."

Physical case bottle and can volume declined 1.5% on a comparable basis for the quarter. Volume in North America was flat for the quarter, while volume in Europe decreased 5.5%. North American volume results reflected weak category performance for regular soft drinks, partially offset by the continued strong growth of Dasani and Powerade. North America also benefited from the introduction of Coca-Cola with Lime, Full Throttle and Dasani flavoured waters.

In Europe, CCE's business outperformed the overall soft drink category, but weak category performance resulted in volume below prior year.

Consolidated net revenue per case was up 1.5% in the first quarter. North American net revenue per case increased 2% with pricing in Europe up 0.5% for the quarter.

Consolidated cost of sales per case increased 3%. All net pricing and cost of sales per case comparisons exclude the effects of currency translations.

"As we move into our key selling season, our focus in North America remains on successfully introducing several important new products, such as Diet Coke Sweetened with Splenda, Coca-Cola Zero, Full Throttle and Dasani flavoured waters," said John R. Alm, president and chief executive officer. "And, just this morning we announced we will distribute Rockstar, a rapidly growing energy drink. All of our new products target categories that are experiencing solid growth and are an integral part of our operating plan to work through a challenging business environment in 2005.

"In addition, we implemented operating expense initiatives to create flexibility in meeting our full-year financial goals," Alm said. "Our first-quarter net revenue per case results reflect our efforts to balance price and volume by moderating our price increases during a period of weak category demand. We are encouraged that the industry pricing environment remains rational and expect improving pricing and volume trends for the remainder of the year as we benefit from our innovation initiatives.

"In Europe, our business is showing improvement as we enter the second quarter, and we expect solid growth this summer as we benefit from a strong marketing calendar and new product and package introductions," Alm said. "A key element of our marketing plans is focused on consumer education regarding the benefits of our zero calorie, zero sugar products. Innovation includes Diet Coke and Coca-Cola Light with Lime in Great Britain and France, orange-flavoured Coca-Cola light Sango in Belgium, a variety of Minute Maid juices and juice drinks in each of our territories, as well as new packaging such as Fridge Pack. "

The company said it continues to expect full-year 2005 earnings per diluted common share in a range of the low-to-mid US$1.30s. Operating income is expected to increase in a range of 3% to 4%, reflecting the benefit of favourable foreign currency translations. Free cash flow from operations less capital spending is expected to total more than US$700m, with capital spending at the low end of the Company's guidance of US$1.0 billion to US$1.1 billion.