Coca-Cola Enterprises today (17 July) reported a second-quarter net loss of US$3.2bn, as the company took a hit from a non-cash pre-tax impairment charge of US$5.3bn.

In a statement, the soft drink bottler said that excluding certain items, comparable second quarter EPS totalled 56 cents compared to 58 cents in the same period a year before. The 2008 quarter, the company said, was driven by modest growth in Europe, favourable tax and exchange rates, and continued weakness in North America.

The company said that it would be accelerating work to create fundamental changes in its North American operations, including price rises.

The US$5.3bn charge was necessary, CCE said, to reduce the book value of the company's North American franchise license intangibles to their estimated fair value.

The move was taken "in light of an expected near term decline in operating income and a recent decline in CCE's stock price - both largely the result of deteriorating North American macroeconomic conditions and expected substantial increases in commodity costs," a statement said.

John F. Brock, chairman and chief executive officer, said: "Our operating framework and its destination remain the right long-term vision for CCE. As we undertook these extensive changes, we recognised our North American business had fundamental issues that needed to be addressed to achieve our long-term growth objectives.

"We targeted the 2008-2010 period to make the substantial changes required to resolve these challenges, which include improving profitability on future consumption packages, addressing multi-year margin compression, and recruiting new consumers to the sparkling beverage category.

"Continued significant declines in the North American economy, coupled with unprecedented escalating commodity costs, are negatively impacting our results and restricting our outlook for near term growth. This creates an immediate need to accelerate substantive operating changes in our business," he said.

"As a result, we are taking action including establishing pricing levels that cover input costs, strengthening execution, restoring growth to immediate consumption by recruiting new consumers, and reducing operating expenses. One immediate step is to implement, post-Labor Day, a price increase targeted at future consumption packages in the United States. This will improve our financial performance and further our efforts to balance value and volume across packages and channels.

"In addition, we have initiated a 120-day review to evaluate how best to accelerate and expand the scope and pace of change in key operating areas and will look at fundamental issues and opportunities including our system supply chain, operations, and price-package architecture and put into motion the essential changes required to drive long-term profitable growth and shareowner value in North America. This work requires continued cooperation with The Coca-Cola Company as we work together to improve the long-term outlook for our North American business over the coming months," said Brock.

In the second quarter, North American volume declined 1.5%. European volume declined 1% in the second quarter, affected negatively by the impact of a two-week labour disruption in France and offset by the benefits of the activation for the Euro 2008 soccer event. In the UK, the company achieved modest growth on the strength of a mid single-digit increase in brand Coca-Cola. On the continent, Coca-Cola Zero achieved solid growth in the quarter despite lapping introductory volume from a year ago.

CCE said it now expects full year comparable 2008 earnings per diluted common share to be in the range of $1.40 to $1.45. Including currency benefit, full year operating income will decrease in a low single-digit range, with solid growth in Europe and a decline in North America in the low teens.