GREECE: Weather and costs affect Coca-Cola Hellenic H1 estimates
Coca-Cola Hellenic Bottling today warned that several external factors have led to a weakness in the performance of its first half of the year.
In a statement, the soft drinks group admitted that it was having to adjust its near-term outlook. However it added that "longer-term we continue to believe that the structural characteristics of our geographic portfolio and our strong market place capabilities will help us to create ongoing value for our shareholders."
CCHBC said that poor weather, the weak economic environment and the continued rise in oil prices were leading it to revise it forecasts.
The company said there was likely to be an adverse affect on its operating profit result, particularly in the first half of the year, which its expects to be down in the mid-to-high single-digits versus prior year.
Volume growth was revised down to approximately 6% (7% previously); EBIT growth is expected to be approximately 5%-7%, (11%-13% previously) and EPS is estimated to come in at €1.37-€1.40, an increase of 5%-8%, (€1.46-€1.49, an increase of 12%-15% previously).
The statement continued: "In our quarterly results announcement on the 8th May 2008, we stated that whilst we still expected to deliver on our full year guidance, we remained watchful and realistic about the possible risk of an economic slowdown in some of our key markets, as well as further commodity cost pressures, notably PET."
The company said that trading during most of April was satisfactory, but some signs of weakening market conditions and unfavourable mix emerged at the end of that month. This was compounded in May, the start of our high selling season, with volume growth in the low-single digits being well below its initial plans.
The economic environment in some of its markets, particularly Italy, Ukraine and Romania, has become increasingly challenging with early signs of rising food and fuel prices adversely impacting consumer sentiment and restricting discretionary spending.
Furthermore, the continued rise in global oil prices to unprecedented levels negatively impacted its cost base, primarily relating to our PET contracts and distribution expenses.
In Greece, one of CCHBC's key markets, a 12-day general transportation strike in May limited the company's ability to fulfil customer orders for at least three to four weeks ahead of our high selling season, particularly in the higher margin immediate consumption channels.
Doros Constantinou, managing director of Coca-Cola Hellenic, said: "In light of softer than expected trading performance that we have witnessed in some of our markets, particularly in May, we are updating our 2008 full year guidance. We are already initiating specific action plans to meet these challenges and I believe that the steps we are taking will enable us to deliver on our updated full year guidance. Over the long-term, the unique strengths of Coca-Cola Hellenic's proven business model and our clear set of value-focused strategic priorities give me confidence in our ability to achieve our previously communicated long-term growth targets."
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