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Consumer downturn hits Greek Coke bottler's profit

Greek bottler Coca-Cola Hellenic (CCH) reported 2008 profit well below forecasts as consumers thought twice before buying soft drinks and cost cuts by the company were offset by negative currency effects.

CCH, the world's second largest bottler of Coca-Cola drinks, reported net profit down 10% at €425 million. Analysts in a Reuters poll were expecting €468.2 million on average. The company declined to give a forecast for 2009.

Earnings per share fell 11% to €1.16, missing the bottler's own target of €1.30.

The soft drinks industry has been badly hit by the global economic downturn, which has seen consumers cut down on impulse purchases of beverages.

CCH, which bottles Coke-branded products in 27 countries across Europe and in Nigeria, has responded to the adverse conditions by cutting 150 jobs in Poland and is looking for opportunities to further squeeze costs.

“For the full year, deteriorating economic conditions and unfavorable summer weather led to softer-than-expected volume growth, particularly in the higher-margin immediate consumption channel,” Chief Executive Doros Constantinou said in a statement.

Net profit in the fourth quarter - traditionally weak in terms of sales volume - fell 93% to €3 million, sharply below market expectations. CCH blamed rapidly declining currencies in many key markets since November for the drop.

CCH said full-year sales volume grew 5% to 2.1 billion unit cases, slightly above its target of 4% growth despite a 2% volume drop in Russia, its largest market.

For 2009, the bottler gave no targets, saying the absence of reliable economic estimates and currency forecasts amid uncertain global conditions made a profit outlook meaningless.

The stock trades 8.8 times estimated 2008 earnings, compared with a multiple of 11.2 and 15.3 for peers Coca Cola Enterprises and Australian Coca-Cola Amatil respectively.

Analysts attribute the discount to CCH's higher exposure to foreign exchange risks in Eastern Europe compared to its peers. (Reuters)