Coca-Cola Enterprises Inc. (CCE)
Q1 2010 Earnings Call
April 27, 2010 10:00 am ET
Thor Erickson – Vice President, Investor Relations
John Brock – Chief Executive Officer
Bill Douglas – Chief Financial Officer
Steve Cahillane – President, North American Group
Hubert Patricot – President, European Group
Kaumil Gajrawala - UBS
Judy Hong - Goldman Sachs
Bill Pecoriello - Consumer Edge Research
Caroline Levy - Credit Agricole Securities
Mark Swartzberg - Stifel Nicolaus & Company, Inc.
John Faucher - J.P. Morgan
Damian Witkowski - Gabelli & Company
Carlos Laboy - Credit Suisse
Lauren Torres – HSBC
Previous Statements by CCE
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Good day and welcome to the Coca-Cola Enterprises first quarter 2010 earnings conference call. At the request of Coca-Cola Enterprises, this call is being recorded for instant replay purposes. At this time I would like to turn the conference over to Mr. Thor Erickson, Vice President of Investor Relations. Please go ahead sir.
Thank you and good morning everybody. We appreciate you joining us this morning to discuss our first quarter 2010 results and outlook for the rest of the year.
Before we begin, I would like to remind you all of our cautionary statement. This call will contain forward-looking management comments and other statements reflecting our outlook for future periods. These comments should be considered in conjunction with the cautionary language contained in this morning’s release as well as the detailed cautionary statement found in our most recent annual report on Form 10-K and subsequent SEC filings. A copy of this information is available on our website at
This morning’s prepared remarks will be made by John Brock, our CEO, and Bill Douglas, our CFO. Steve Cahillane, President of our North American Group, and Hubert Patricot, President of our European Group are also with us on the call this morning. Following prepared remarks we will open the call for your questions. In order to give as many people as possible the opportunity to ask questions, please limit yourself to one question and we will take follow up questions as time permits. Now I’ll turn the call over to John Brock.
Thank you Thor, and we thank each of you for joining us today as we discuss our first quarter 2010 results and also review the progress of the transaction with the Coca-Cola Company.
In the first quarter we achieved comparable earnings per share of $0.27, which is up $0.07 from our results for the first quarter a year ago. This includes a $0.01 per share currency benefit. Comparable consolidated operating income grew 9.5% though revenue declined just over 1%. Overall we’re encouraged by these results, which were achieved through continued solid growth in Europe and our ability to manage through difficult operating conditions in North America. In light of these results and our outlook for the remainder of our year, we’ve increased our full year guidance. We now expect comparable currency neutral earnings per share growth of about 10%. Bill will provide more detail on this in a moment.
Now, let’s look at our territory results. In Europe, currency neutral operating income was up 9% through a combination of balanced volume and pricing growth. In addition, we continue to execute against initiatives that are driving both efficiency and effectiveness. Much like last year, our Red, Black and Silver Sparkling portfolio remains a key growth driver throughout our European territories, with volume up 3.5%. Brand Coca-Cola continues to generate a majority of this growth, even as we continue to develop Coca-Cola Zero as a key brand.
We also achieved a strong 30% growth in Energy. In addition, we’re improving our still portfolio with the introduction of Ocean Spray juice drinks into both Great Britain and France, continued growth from Glacéau, and the introduction of Capri Sun in both Belgium and the Netherlands.
Going forward this year we will focus on key areas of our business in Europe. First, we will fully realize the benefits of our World Cup opportunity, and in fact execution has already begun against this initiative. The World Cup is a tremendous marketing asset and we know that our execution plans for the event are exceptionally strong, with programs tailored to the needs of key customers and to specific markets. This creates significant store placement opportunities which we will seize with world class execution.
Second, we will continue to grow our Energy segment, which offers excellent opportunities through the addition of Monster, as well as the ongoing strength in Burn and Relentless. And third, we will execute our initiatives to drive increasing levels of effectiveness, both in terms of how we operate and how we interface with our customers.
We’ll also benefit from initiatives that will continue to optimize key business functions. One example here is our cooler service initiative to improve operations, create savings and strengthen service. In addition, we also continue to transform our go to market models, building direct store delivery, quality service and availability into our system where it’s appropriate, and improving levels of customer service.
Now let’s turn to North America. Our first quarter results reflect a challenging quarter with difficult economic conditions, weak consumer spending trends, and severe weather that limited our overall performance. In the first quarter comparable operating income declined 2%, revenue declined about 5%. Revenue was negatively affected by pricing, mix and a decline in volume. Pricing reflects the mix impact of slower single serve sales, volume declines in higher price still drinks and increased multi serve volume, driven in part by the shift of Easter into the first quarter. In addition, pricing was affected by the challenge of hurdling 10% pricing growth in the quarter a year ago. This pricing level benefited in part from the overlap of selling both Rockstar and Monster as we transitioned away from Rockstar. Excluding these factors, the overall rate for sparkling drinks was up, although the increase was more modest than expected.