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Coca-Cola Hellenic Profit Drops 15% on Austerity, Currencies

Coca-Cola Hellenic Bottling Co. SA, the world’s second-largest bottler of Coke drinks, posted a 15 percent decline in second-quarter profit as poor weather and austerity measures in European markets slowed demand.

Net income fell to 119.6 million euros ($148 million) in the three months to June 30 from 141.4 million euros a year earlier, Athens-based Coca-Cola HBC said today in a statement on its website. Revenue in the quarter rose to 1.99 billion euros from 1.97 billion euros.

“Strong currency headwinds and higher input costs also adversely affected profit in the quarter,” Dimitris Lois, chief executive officer, said in a telephone interview today. “Despite this we grew revenue ahead of volume for the fourth consecutive quarter.”

The euro declined 5.1 percent against the dollar in the second quarter as the region’s debt crisis intensified and economic growth slowed. Coca-Cola HBC pays in dollars for raw materials such as PET, used to make plastic bottles, and for aluminium to make cans.

Lower prices for PET are now easing input costs “and we expect these to show a mid-single digit increase for 2012 compared with a previous forecast for a high single digit rise,” Lois said.

This benefit will be offset by unfavorable foreign currency movements, reflecting the decline in the euro against the dollar and the impact of the euro area’s debt crisis on currencies in emerging and developing markets, he said.

Challenging Trade

The company expects “challenging trading conditions” to persist across most of its markets with a further deterioration in disposable income and weak consumer confidence in markets such as Greece, Italy, Ireland, Hungary and the Czech Republic, according to the statement.

“Given a macroeconomic environment which is getting tougher and the negative currency impact, we will accelerate restructuring initiatives planned for 2013 and bring the majority of them into the fourth quarter this year,” Michalis Imellos, chief financial officer, said today in a telephone interview.

Savings this year from these changes and others already made in 2011, will now rise by 10 million euros to 50 million euros while from 2013 onwards savings will reach 70 million euros, up from 35 million euros, Imellos said.

Cases of drinks sold in emerging markets, which include Ukraine and Romania, rose 2 percent to 292.2 million in the second quarter boosted by higher sales in Russia. “We see the economic and trading environment in Russia improving and we expect the country to continue to drive volume growth in the emerging market segment,” Lois said.

Coca-Cola HBC reiterated capital spending guidance for 2012-14 of 1.45 billion euros and the same amount in free cash flow generation.

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