Tags: Coca-Cola | Hellenic | invests | CCH

Coca-Cola Hellenic Invests to Push Profits

By    |   Monday, 10 Oct 2011 02:57 PM

Coca-Cola franchisee Coca-Cola Hellenic Bottling Company (CCH) suffered from a decline in profits in the first half of 2011 due to economic problems in its home country of Greece and rising commodity costs. Now it will invest to pump up profits, management says.

To help grow the sales of Coke products, the company and Coca-Cola (KO) have announced a major investment in Russia, one of Coca-Cola Hellenic’s major markets. The unit is Coke's second-largest bottling franchisee after Coca-Cola Enterprises (CCE) in the United States. Coke HBC's territory includes 28 countries covering Southern, Central and Eastern Europe, Ireland, Nigeria, and Russia.

For the first half of 2011, the company saw net income per share decline by 28 percent from the first half of 2010. Unit sales and revenues both increased by 3 percent during the period. However, increased raw material and expense costs increases led to the lower net profits. In the first half of 2011, revenues increased by 95 million euros compared to a total increase of almost 180 million euros in cost of goods sold and operating expenses.

The consensus earnings per share for 2011 is $1.50, down from $1.74 earned in 2010. Forecast earnings are $1.63 in 2012.

Expansion in Russia

In September, Coca-Cola in conjunction with Coca-Cola HBC announced plans for a $3 billion expansion in Russia over the next five years. The Coke partnership already has 17 bottling plants in Russia, and the company cited the large growth potential in Russia as a beverage emerging market.

Coca-Cola HBC faces higher material costs, fluctuating exchange rates, and the economic and political uncertainties in the company's home country of Greece. The semi-annual earnings report noted raw material costs are expected to continue to increase at double digit rates. Potential for growth includes low current market penetration for the emerging market countries and planned product price increases.

The most recent analyst communication is from the analysts at HSBC Securities. They downgraded CCH to neutral from overweight.

The company reports next on Nov. 3.

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Coca-Cola franchisee Coca-Cola Hellenic Bottling Company (CCH) suffered from a decline in profits in the first half of 2011 due to economic problems in its home country of Greece and rising commodity costs. Now it will invest to pump up profits, management says. To help...
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Monday, 10 Oct 2011 02:57 PM
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