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Coke Issues Profit Warning

The beverage maker cites poor weather and problems executing its business strategy in the third quarter.

September 16, 2004|From Associated Press

Coca-Cola Co. warned Wednesday that its third-quarter per-share results would drop at least 24% from a year ago because of poor weather in Europe and problems executing its business strategy in North America. The company's stock fell on the news.

The world's largest beverage maker temporarily shelved its policy of not giving quarterly earnings guidance in announcing the unfavorable outlook.

"Today, we are not growing the way we should be," Chief Executive E. Neville Isdell said.

Atlanta-based Coke said its reported net earnings for the July-to-September period would be in the range of 35 cents to 38 cents a share. At 38 cents, that would be a 24% decline from the 50 cents Coke reported in the same period in 2003.

Excluding charges, Coca-Cola said it now forecast third-quarter earnings of 46 cents to 48 cents a share. Analysts surveyed by Thomson First Call were looking for Coca-Cola to post third-quarter earnings of 54 cents a share, excluding one-time items.

For the second half of the year, the company now expects to earn 88 cents to 92 cents. Coke releases its third-quarter and year-to-date earnings on Oct. 21.

"I am not satisfied," said Isdell, who was named CEO in May, replacing Doug Daft. "I understand these results to be the symptom and not the problem, and we will set about what is needed to move our business forward and improve our long-term performance."

Shares of Coke fell $1.71, or 4%, to $41.16 on the New York Stock Exchange. Coke's stock had risen steadily over the last year to a high of $53.50 in April before dipping in July and hovering around $40. Rival PepsiCo Inc.'s stock has fallen since it reached a high of $55.71 in June, but less dramatically than Coke's stock; the Purchase, N.Y.-based beverage company's shares have hovered around the $50 mark since mid-July.

The company blamed unfavorable volume trends in the North America bottle and can business, as well as changing marketplace dynamics in Germany and unfavorable weather conditions in northern Europe for its reduced forecast.

In North America, Coke also has seen some challenges with sales of its new mid-calorie cola, C2, Isdell said. Although the company has had success in sales of its 20-ounce version, it has underperformed with its eight-pack can version, Isdell said.

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