Growth in Europe will help drive overall volume growth of 2% in 2005 for the Pepsi Bottling Group, the company estimated today.

The group said it saw volume in the US improving by 1-2% for the year, adding that worldwide and US net revenue per case are both are on-track to increase 3%.

PBG said it expects diluted earnings per share for the year to be in the range of US$1.71 to US$1.74, excluding the US$0.02 favourable impact from certain international tax matters.

Operating income is projected to improve 3%, reflecting the downward pressure from the significant cost increases of raw materials. The company's cash flow forecast continues to be strong, with net cash from operations less capital expenditures expected to be about US$530m, an approximately 20% increase over 2003 results. Capital expenditures are expected to be about US$700m.

Commenting on PBG's performance in 2004, Cahill said: "We will deliver solid results for our shareholders in 2004. In the US, successful innovation and outstanding execution in the marketplace has led to balanced topline growth. The introduction of Tropicana juice drinks and the strategic use of limited-time offers, such as Mountain Dew Pitch Black and Pepsi Holiday Spice, have fueled our volume improvement.

"Our international markets have contributed to our overall performance. Europe will deliver strong growth in volume and profits despite a difficult environment. In Mexico, we have seen consistent improvement in our volume and share trends as the year progressed. Our chief challenges there came from packaging and sweetener cost increases and a difficult pricing environment, which has led to disappointing operating profit. Our management team in Mexico has made substantial progress this year in the areas of marketplace execution and capability, and we believe that improvement will continue in 2005."

Cahill continued: "As we look to 2005, we have a strong slate of innovation planned in nearly all of our territories and will continue to raise the bar on executional excellence with new programs and initiatives. We are committed to driving balanced topline growth and believe we have the right plans to achieve that objective. The challenge of rising raw materials costs will continue into 2005. We expect to incur a more than $100 million increase in our packaging and sweetener costs versus 2004, which will have an impact on our profitability next year. Our plans, however, reflect the realities of the environments in which we operate and I have tremendous confidence in the capability of our people to win in the marketplace."