Coke bottler to spend $5B
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July 22, 1998: 9:52 a.m. ET
Coca-Cola Enterprises plans capital outlays to boost growth; 2Q profit flat
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NEW YORK (CNNfn) - Coca-Cola Enterprises Inc. unveiled a three-and-a-half-year, $5 billion capital spending program Wednesday aimed at shoring up the soft drink bottler's industry-wide dominance into the next century.
The bottling behemoth -- which sells more than 65 percent of Coca-Cola Co.'s soft drinks in North America and owns exclusive bottling rights to the company's products across much of Europe -- announced its plans as it posted weaker-than-expected second-quarter earnings.
Coca-Cola Enterprises, based in Atlanta, said its net income in the second quarter was unchanged from the year-ago period, at $111 million. Per-share earnings on a fully diluted basis, however, fell to 27 cents from 28 cents, missing consensus estimates by a penny.
Coca-Cola attributed the differential to an increase in the company's total shares outstanding following its recent purchase of Coke Southwest.
In the first half, Coca-Cola said its earnings per diluted share slipped 25 percent from a year earlier, to 15 cents from 20 cents.
Revenues rose 27 percent in the second quarter, to $3.69 billion from $2.91 billion a year earlier. Consolidated constant-territory case bottle and can volume increased 8 percent in the quarter, while North American case volume grew a little more than 9 percent.
European volume growth lagged, at 4 percent, due to unseasonably cold and rainy weather in early April and June in most of the company's European markets.
The capital spending plans, approved by the company's board Tuesday, is aimed at boosting growth from cash operations to 12 percent in 1999 from a projected 10 percent this year.
The spending levels, the company said, will reduce diluted earnings per share in 1998 to about 25 cents, with roughly 10 percent earnings growth projected in 1999. In 2000 and 2001, the company estimated, growth from earnings will accelerate to more than 50 percent each year.
The plan envisions capital expenditures of $1.4 billion to $1.6 billion annually through 2000, and $1.1 billion to $1.3 billion in 2001. Total spending at the end of the campaign will range from $4.5 billion to $5.3 billion.
The company said the plan is necessary to meet targeted volume growth rates and avoid having to reduce capital allocated to the high-margin cold-drink market.
"The timing for undertaking this type of capital spending program is right," said Summerfield Johnston, Jr., chairman of Coca-Cola Enterprises. "Interest rates are low, the economy is strong, our business has unparalleled momentum, and the Coca-Cola system has never been stronger."
Coca-Cola Co. products such as Coca-Cola classic, diet Coke, Barq's and Sprite account for nearly 90 percent of the total sales of Coca-Cola Enterprises, of which it is a 44 percent owner. Among other beverage brands bottled and distributed by CCE are Dr Pepper, Canada Dry and Nestea.
Shares of Coca-Cola Enterprises (CCE) were unchanged at 39 in early trading Wednesday on the New York Stock Exchange.
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