The following is a summary of a UBS full-length report on this topic, dated
November 3, 2005.
* Non-Carbonated Drinks Continue to Drive Sales:
North America sales, which contribute about 70% of revenues, were driven
by water, sports drinks and energy drinks. A shift in consumer preference
and the impact of hard discounters resulted in European volume decline of
2%. Management believes long-term growth in Europe, as in North American,
will involve less reliance on full-calorie carbonated drinks.
* 3Q05 Sales and Earnings Increase 4.8%and 15.2%, respectively:
3Q05 sales increased 4.8% to $4.9 billion due to improved pricing and
double digit growth of non-carbonated drinks. Operating earnings improved
15.2% to $470 million, representing 9.6% of sales. 4Q05 results are expected
to weaken due to packaging costs, fuel prices, and the lingering effects of
the hurricanes, which affected a prime market (Gulf Coast) for CCE's
products.
* We Maintain Our Underperform:
CCE spreads appear rich given CCE and parent, Coca-Cola Company, must
contend with declining sales of core carbonated drinks. We maintain our
Underperform.