Coca-Cola Enterprises Inc. (CCE)
Q2 2010 Earnings Call Transcript
July 28, 2010 10:00 am ET
Thor Erickson – VP, IR
John Brock – Chairman and CEO
Bill Douglas – EVP and CFO
Hubert Patricot – EVP and President, European Group
Steve Cahillane – EVP and President, North American Group
Mark Swartzberg – Stifel Nicolaus
Judy Hong – Goldman Sachs
Kaumil Gajrawala – UBS
Lauren Torres – HSBC
Caroline Levy – CLSA
Damian Witkowski – Gabelli & Company
Bill Pecoriello – Consumer Edge Research
Alec Patterson – RCM
Previous Statements by CCE
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Good day and welcome to the Coca-Cola Enterprises second quarter 2010 earnings conference call. At the request of Coca-Cola Enterprises, this conference 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 second quarter 2010 results and our outlook for 2010.
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 earnings 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 Web site at www.cokecce.com.
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.
Thanks Thor and we welcome each of you to our call today as we discuss our second quarter 2010 results and also provide an update on the progress of our transaction with the Coca-Cola Company.
As you know from our news release this morning, we achieved strong growth in the quarter with comparable earnings per share of $0.79 and net income of $405 million. Based on our results through the first half of the year and on our outlook for the remainder of 2010, we have raised our full year guidance. We now expect earnings per share in the range of $1.73 to $1.77, which includes a negative currency impact of about $0.06 and that excludes nonrecurring items.
We are pleased with this progress achieved as we continue to navigate a difficult economic and marketplace environment, and as we prepare for the close of the transaction with the Coca-Cola Company. This is a testament to the dedication and the ability of our teams in both North America and Europe, who continue to focus on delivering our full year objectives even as we work to transform the structure of our operations.
Our financial results for the second quarter include revenue growth of 1% and consolidated comparable operating income growth of 21%, both excluding the impact of currency. On a territory basis, Europe produced solid growth driven primarily by volume. Comparable revenues increased 5% excluding currency and volume was about 5.5%. We continue to achieve significant growth with our key Coca-Cola trademark brands including Coca-Cola, Diet Coke, and Coca-Cola Zero. These brands grew a combined 3.5% including importantly 14% growth for Coke Zero. At the heart of this growth has been a combination of outstanding marketplace execution and excellent support of promotions for the World Cup, which captured Europe’s attention with three European teams in the final four.
In addition to volume growth, there were several factors at work in Europe’s operating results including a modest decline in cost of goods per case, the ongoing benefits of our effectiveness initiatives, operating savings created through our ownership cost management program, and beneficial weather conditions. We also benefited from a stronger marketplace presence in stills, which were up more than 15% during the quarter. This reflects the addition to our portfolio of Capri-Sun in Belgium and the Netherlands, and of Ocean Spray in France and Great Britain.
Overall continued success in Europe will demand increasing levels of executional excellence. We must continue to meet individual customer needs and work to improve customer service. Towards this goal, we are broadening our go-to-market model, as we find new ways to meet the needs of each customer and channel. For example, we are working with customers to tailor in-store execution to their unique needs, an approach that is vital to meet the requirements of a changing retail environment, and to be our customers’ most valued supplier.
Now, let us turn to North America, which achieved comparable operating profit growth of 21% with essentially flat revenue growth. This positive operating income growth is the result of a combination of modest volume growth, gross margin improvement driven by a decline in the cost of goods sold per case, and ongoing cost control and effectiveness efforts. Overall, operating conditions in North America do remain challenging, and though we have begun to see some slight improvement in overall economic activity, retailers remain challenged to increase activity in their stores.