Coca-Cola Enterprises Cuts 5% Of Workforce As Quarterly Loss Widens
Coca-Cola Enterprises, the biggest bottler of Coca-Cola beverages, said it will cut 5% of its work force, or about 3,500 jobs, as part of a restructuring effort that will cost about $300 million.
The job cuts come as the company posted a wider fourth-quarter loss, weighed down by a $2.9 billion impairment charge.
Coca-Cola Enterprises has been struggling with higher costs for aluminum and other commodities and a shift in consumer tastes away from carbonated beverages to juices, teas and waters. As a result, analysts had been expecting the company would make an effort to lower its cost structure.
The Atlanta company said the restructuring is aimed at improving its supply chain and order fulfillment structure, and improving customer service. The plan will result in a charge of about $300 million, which will be booked in 2007 and 2008.
Coca-Cola Enterprises, which is 36% owned by Coca-Cola , also announced efforts to expand its existing product portfolio "in fast-growing beverage groups" and to make its distribution more efficient.
For the fourth quarter, Coca-Cola's loss widened to $1.71 billion, or $3.59 a share, from a loss of $57 million, or 12 cents a share, a year earlier.
Excluding special items, the bottler earned 20 cents a share in the latest quarter, compared with 14 cents a share a year earlier.
The impairment charge was related to the reduction of the book value of the company's North American franchise licenses to their estimated fair value. The charge relates to goodwill created years ago with a number of acquisitions completed about 10 to 12 years ago.
Revenue rose 6.5% to $4.79 billion from $4.49 billion a year earlier.
Analysts polled by Thomson Financial expected, on average, earnings of 16 cents a share on revenue of $4.65 billion.
"While we are pleased to finish 2006 slightly ahead of our revised expectations, our financial performance was below the level we believe our organization can produce over the long-term," said President and Chief Executive John F. Brock in a statement.
CCE said that it expects North American cost of sales to be up about 9% per case this year, compared to an average increase of 2.5% over the past five years.
Due to the "extraordinary" cost environment, CCE expects 2007 earnings per share to be down 5% to 10% compared to 2006, when it earned $1.30 a share on a comparable basis.
As the company receives the benefits of its restructuring, Coca-Cola Enterprises expects it will be able to achieve long-term annual revenue growth of 4% to 5%, operating income growth of 5% to 6% and high-single-digit per-share earnings growth.
For 2007, analysts anticipate earnings of $1.25 a share on revenue of $20.6 billion.