Greek bottler Coca-Cola Hellenic posted a larger-than-expected 93 percent drop in first-quarter profit on Thursday but its CEO said cost savings and lower input prices should help support profits through the rest of the year.
The world's second-largest bottler of Coca-Cola drinks said its first-quarter net profit net profit fell to 1.9 million euros ($2.5 million), as the recession hit demand for soft drinks and weakened currencies in key markets.
Analysts in a Reuters poll had forecast 9.9 million euros in net profit on average.
The global downturn has seen consumers cut spending on soft drinks, and analysts said the approaching summer season would be crucial for the company's full-year performance.
CCH said currency devaluations against the euro in a number of key markets in Central and Eastern Europe and restructuring costs of 7.7 million euros also weighed on the bottom line.
The company, 23.3 percent-owned by Coca Cola, bottles Coke-branded products in 27 countries across Europe and Nigeria.
The bottler did not give specific guidance for the full year, saying the economic environment remains challenging and difficult to predict. It added that foreign exchange losses were expected to continue for the rest of the year.
Chief Executive Doros Constantinou said he was confident that cost saving initiatives and lower raw material prices would help support profit for the rest of the year.
"Our robust capital structure together with the actions we are implementing will further strengthen our competitive position," Constantinou said in a statement.
The company has cut its workforce by about 4,500 people since July last year as part of its cost cutting scheme. It is targeting operating cost savings of about 100 million euros this year.
Shares for CCH were up 6.56 percent at 0839 GMT, outperforming the Athens stock exchange index.
FOCUS ON Q3 TOURISM
In a telephone interview after the results, Constantinou told Reuters the firm was investing in building its brand and taking action to promote its products on Greek islands and other tourist destinations ahead of the summer.
Analysts are now focused on the impact of the global crisis on tourism in key markets such as Greece, Italy and Cyprus, crucial for the summer season, CCH's strongest based on sales.
"The firm seems to perform relatively well on sales volume in most of its markets," Piraeus Securities analyst George Doukas said.
"However, the crucial period is the third quarter where visibility is low. We wait to see whether the expected weak performance of tourism in major markets will have a significant impact on CCH," he added.
Sales volume in the first quarter rose 3 percent to 441 million unit cases, slightly above market expectations, with double-digit growth in established markets more than offsetting a drop in emerging markets.
Constantinou told Reuters the first-quarter volume trend continued into the second quarter with Italian bottler Socib, which was bought last year, having a positive impact.
The firm said it targeted a 300-million-euro increase in free cash flow to 1.2 billion euros at least over the 2009-2011 period through cost cutting efforts.
CCH stock trades at 11 times estimated 2009 earnings, compared with a multiple of 12.7 for Coca Cola Enterprises, the world's largest bottler of Coke drinks, and 13.8 for rival Pepsi Bottling.
