February 11, 2009 / 12:56 PM / 10 years ago

UPDATE 4-Coke Enterprises profit tops view; shares surge

* Q4 adj EPS 22 cents tops Wall St view by 3 cents

* Revenue down 1 pct; volume down 5 pct

* Affirms ‘09 EPS view for growth at mid-single-digit rate

* Shares up 10 percent (Adds details from conference call)

By Martinne Geller

NEW YORK, Feb 11 (Reuters) - Coca-Cola Enterprises Inc CCE.N reported a higher-than-expected quarterly profit on better margins and affirmed its 2009 outlook, sending the bottler’s shares up 10 percent.

The largest bottler of Coca-Cola Co (KO.N) drinks cited a modest improvement in North American profit trends, which probably benefited from price increases.

The company raised prices in September and was therefore able to offset a 9.5 percent increase in quarterly costs for raw materials, which include aluminum, corn and plastic.

Company executives said on a conference call that they had raised prices again in North America in the current quarter, as the bottler seeks to offset the impact of the strengthening U.S. dollar.

Coke Enterprises said the stronger dollar, which depresses the value of overseas sales, will now reduce 2009 earnings by 20 cents per share, up from its prior forecast for a 15-cent impact.

The company reported a net loss of $1.45 billion, or $2.99 per share, compared with a year-earlier net profit of $158 million, or 32 cents per share.

Excluding a $2.3 billion impairment charge for writing down the value of its North American franchise license, the bottler earned 22 cents per share. Analysts on average were expecting 19 cents, according to Reuters Estimates.

Revenue fell 1 percent to $5.24 billion as an 8 percent increase in pricing did not completely offset a 5 percent decline in volume. Volume fell 7 percent in North America and rose 1.5 percent in Europe.


JPMorgan analyst John Faucher said operating profit fell 13 percent, which was better than both the 21 percent drop he had expected and the company’s average decline of 22 percent over the first three quarters of the year.

Total company gross margin shrank by 0.7 percentage points, Faucher said, which was better than the 1.7 point contraction he had expected.

“Things seem to be improving sequentially, probably due to pricing,” Faucher said in a research note.

Analysts had hoped that higher prices would boost margins now that costs for many commodities are well off their highs.

Coke Enterprises said it had hedges in place for the majority of its corn and aluminum exposure in 2009 but was looking to hedge fuel or other unhedged exposures as a way to improve its cost outlook.

The company is also trying to streamline its operations. In December it said it planned to reduce its U.S. business units from six to four and to more closely integrate its supply chain with Coke’s. It said on Wednesday that it had formed a joint company with Coke called Coca-Cola Supply.

The bottler said it expected operating income to grow at a low single-digit percentage rate in 2009 and earnings per share to increase at a mid single-digit rate, excluding an impact from currency. It expects revenue growth at a mid single-digit rate.

Coke Enterprise shares rose $1.19 to $13.15 on the New York Stock Exchange. Through Tuesday’s close they had jumped 65 percent since November, when they touched a one-year low of $7.25. (Additional reporting by Jessica Wohl in Chicago; Editing by Maureen Bavdek and Lisa Von Ahn)

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