Coca-Cola Enterprises' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Coca-Cola Enterprises, Inc. (CCE)

Q2 2012 Earnings Conference Call

July 23, 2012 10:00 AM ET

Executives

John F. Brock - Chairman and CEO

William W. Douglas III - EVP and CFO

Hubert Patricot -EVP and President, European Group

Thor Erickson – VP, Investor Relations

Analysts

Caroline Levy - CLSA

William Schmitz - Deutsche Bank

Lauren Torres - HSBC

Stephen Powers - Sanford C. Bernstein & Co

Kaumil Gajrawala - UBS Warburg

Judy Hong - Goldman Sachs Group, Inc.

Bryan Spillane – Bank of America/Merrill Lynch

Mark Swartzberg - Stifel, Nicolaus & Company, Inc.

John Faucher - J.P. Morgan Securities Inc

Priya Ohri-Gupta - Barclays Capital

Presentation

Operator

Good day and welcome to the Coca Cola Enterprises Second Quarter 2012 Conference Call. At the request of Coca Cola Enterprises this conference is being recorded for instant replay purposes. At this time I'd like to turn the conference over to Mr. Thor Erickson, Vice President of Investor Relations. Please go ahead, sir.

Thor Erickson

Thank you and good morning, everybody. We appreciate you joining us today to discuss our second quarter 2012 results and our outlook for the remainder of 2012.

Before I begin, I’d like to remind you of our cautionary statements. 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 statements 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 www.cokecce.com.

This morning’s prepared remarks will be made by John Brock, our CEO, and Bill Douglas, our CFO. Hubert Patricot, President of our European Group is also with us on the call this morning. Following the 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 will turn the call over to John Brock.

John F. Brock

Thank you, Thor and we thank each of you for joining us, particularly on a Monday rather than our traditional mid week day. We’re in London in conjunction with our Board of Directors meeting and the upcoming London Olympics. I can tell you this is a city filled with excitement in anticipation of the London Olympic and Paralympic Games and we’re proud to have a significant role in the games. I will have more on this in a few moments.

Turning to our second quarter results, overall the quarter was very challenging as we work through a combination of bad weather, economic and market factors as well as comparisons to strong growth in the same quarter one-year ago.

Regarding weather, while we’re always reluctant to cite it as a factor in our results, we faced extraordinary weather related second quarter pressures in all of our territories. For example, this was the wettest second quarter in the United Kingdom in over 100 years and the wettest April in France in over 50 years. Reflecting these factors, our second quarter earnings per share totaled $0.73. Operating income was down 2% and net sales were flat, both on a comparable and currency neutral basis.

Our net sales figure also includes a 2% gain from the French excise tax increase.

Let me note that our long-term prospects for growth remained solid and the recent weather challenges are temporary. We are focused on the opportunities we see ahead, our business fundamentals remain solid and we’re committed to continuing to manage each aspect of our business to deliver long-term value building growth.

In fact, despite the difficulties in the second quarter, currency translation and ongoing weak macroeconomic conditions, the full-year guidance we’re providing today for both earnings per share and operating income is essentially the same as the guidance that we initially provided last December. We plan to deliver these results by managing the leverage of our business, including outstanding marketplace execution, customer service, cost control and our strong balance sheet.

Now let’s look more closely at our second quarter results and the factors that contributed to them. As you saw in our release this morning, volume declined 6%, primarily driven by overall unfavorable weathers throughout the quarter as well as the impact of the French tax increase and comparison to strong growth in the same quarter a year-ago. Looking ahead we expect to return to volume growth as we have strong marketing plans and initiatives and importantly our brands continue to provide value and resonate with both our customers and our consumers.

During the quarter, we continue to make important gains in the energy category, with our energy portfolio up more than 16% in the quarter. Our multi-brand energy strategy continues to allow us to seize opportunities with fast growing Monster brands, while gaining additional presence with Burn, Nalu, and Relentless.

The continued success of the Coke Zero brand was also evident during the quarter as the brand achieved low single-digit volume growth. The brand grew in Continental Europe during the quarter and grew an encouraging mid single-digit in Great Britain. For the quarter our cost of sales per case increased 3%, while net pricing per case increased 4%, both excluding – that is excluding the impact of the French excise tax increase. Operating expenses were essentially flat due to market initiatives, cost controls, volume declines and timing that Bill will discuss with you shortly.

Read the rest of this transcript for free on seekingalpha.com