World No. 2 Coke Bottler Profit Hit by Austerity, Costs

ATHENS (Reuters) - Coca-Cola Hellenic (CCH), the world's second-largest bottler of Coca-Cola Co. soft drinks, shed 25 percent of profit in the first half as expected, hurt by austerity in debt-laden Italy, Ireland and Greece and higher commodity costs.

The Athens-based company with operations in 27 countries including Russia and Nigeria said comparable net income was 109 million euros (85 million pounds), against the average of 110.1 million euros forecast in a Reuters poll of analysts.

EU-IMF austerity measures have caused sales volumes to drop in Greece and Ireland as well as Italy, where the government is also curbing spending to cope with higher borrowing costs.

But the firm stuck to its guidance for free cash flow generation and investments of 1.45 billion euros by the end of 2014.

Chief Executive Dimitris Lois is betting on potential growth in markets such as Russia. The company also sees Italy as a long-term growth market, Lois said, praising the government there for making all the right moves to deal with a debt crisis.

"We are very happy to see the initiatives from (Italian Prime Minister Mario) Monti," Lois told Reuters. "He has taken the right initiatives to balance austerity and growth," he added, referring specifically to his decision to postpone an increase in value-added-tax (VAT) rates.

CCH's total sales volumes dropped by 2 percent year-on-year to 1.01 billion cases. But sales rose for a fourth consecutive quarter by 1 percent to 3.43 billion euros.

The company took commercial and marketing initiatives, such as more creative packaging to squeeze more sales out of each case sold, Lois said. It has also been expanding for years into non-sparkling beverages such as tea and health drinks.

These moves helped the company maintain or increase its market volume share in sparkling beverages in most of its markets, including Italy, Switzerland, Austria, Russia, Ukraine, Romania and Bulgaria.

Some analysts, however, remain sceptical.

"The company will face adverse conditions in some basic markets under IMF programmes, such as Ukraine, Hungary and Greece," said Iakovos Kourtesis, an analyst with National Securities who earlier this month downgraded his recommendation on the stock to "neutral".

CCH's shares were up 0.3 percent at 1235 GMT in Athens, underperforming a 1.8 percent rise in the general index.

An expected rise of the U.S. dollar versus the euro and the currencies of other crisis-hit European countries will likely offset any benefits from an easing in raw material costs, the company said.

Input prices will rise in mid-single digits instead of high-single digits as previously forecast, according to Lois, driven by lower prices of PET, a key raw material for plastic bottles.

In an effort to improve profitability, the company will slash personnel and management costs, doubling its restructuring expenses to 100 million euros this year, up from the 50 million euros it stated earlier in 2012.

Greece's debt crisis has also fuelled speculation about the future of the company's base in Greece, particularly its listing on the Athens Stock Exchange.

But Lois dismissed the concerns, saying that any possible downgrade of the local stock market would not take place before the middle of next year and that he would try to make use of the company's other parallel listings in New York and London to make life easier for its investors.

source: nytimes.com

Euro Falls to 3-1/2 Year Low Versus Sterling

LONDON (Reuters) - The euro hit its lowest level in 3-1/2 years against sterling on Friday, with traders citing a German report that quoted a member of a party in the coalition government saying a country should leave the euro zone if it cannot implement agreed reforms.

The euro fell 0.25 percent on the day to 77.895 pence, its weakest level since October 2008.

Asked if Greece could stay in the euro, Gerda Hasselfeldt, a senior member of the Bavarian Christian Social Union (CSU), sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU) said it was up to Greece to implement measures that had been agreed.

"If a country is unwilling or unable to comply with its obligations, it must leave the euro zone," she added in an interview to the Rheinische Post.

The report intensified euro selling, with worries about debt problems in Spain encouraging investors to switch out of euro zone assets into ones perceived to be safer, including UK assets.

source: nytimes.com

US consumer confidence falls in second quarter - Nielsen

LONDON - Consumer confidence fell in the second quarter from early this year as slowing employment growth and an escalating euro zone crisis made Americans more cautious about the economic outlook, a survey showed on Monday.

Consumer sentiment in the world's biggest economy fell by 5 points in the second quarter from the first quarter to 87, according to a quarterly survey by global information and insights company Nielsen, conducted May 4-21.

A reading below 100 indicates consumers are pessimistic about the economic outlook for the coming months.

Only 34 percent of Americans were optimistic about their job prospects for the next six months, compared with 38 percent in a survey in the first quarter, the survey showed. Thirty three percent said now was not a good time to buy things they needed, down from 38 percent in the first-quarter survey.

The poll, covering 500 online respondents in the United States, showed that confidence fell after rising in the two previous quarters although it was still higher than levels seen last year.

"Consumer uncertainty prevails with weak job gains, instability in global financial markets and continued budget issues at local, state and national government level," said Todd Hale, senior vice president of consumer and shopper insights, Nielsen.

Concern for the economy - the top concern for U.S. consumers - increased from the first quarter, with 42 percent of consumers citing the economy as their main concern, up from 40 percent in the previous survey.

Seventy eight percent of Americans believed the economy was in recession. That was down from 83 percent in the previous survey, but 56 percent of those who saw a recession in the latest survey expected the downturn to last at least another 12 months.

The U.S. economy has been losing more steam since May when the survey was taken. Manufacturing, which had been one of the strongest links in an otherwise frail economic recovery, grew in June at its slowest pace in 11 months, suggesting weaker overseas demand and the euro zone debt crisis may be starting to take a toll.

Job creation has also slowed and the Federal Reserve launched another round of monetary stimulus last week to try and stimulate the economy. A recent sharp fall in oil prices, by $35 from March highs to around $90 a barrel, offers some positive news for consumers but its impact will take time to factor through to households.

The U.S. consumer confidence survey is part of the global quarterly Nielsen Survey of Consumer Confidence and Spending Intentions, established in 2005, which tracks consumer confidence, major concerns and spending intentions in 56 countries. The global survey will be published in July.

source: interaksyon.com

Global economy week ahead: US tiptoes around the euro crisis

WASHINGTON - The US employment report for May will measure America's economic resilience to the political turmoil in Europe that is weakening the global growth outlook.

Manufacturing slumped in both China and the euro zone in May, Britain is in recession, Brazil is stagnating and India's growth is faltering, leaving the United States as a relative bright spot in an uncertain world.

Home sales in the United States are perking up, consumer sentiment reached a four-year high in May, and the pace of job layoffs has slowed over the past month, all pointing to a gradual healing in the US economy.

Falling gasoline prices also are pumping up spending power into consumers' pockets. While there are some soft spots—capital goods orders are weak and manufacturing eased in May—it is not enough to derail a plodding US economic recovery.

The government's closely watched monthly jobs report due out on Friday could prove pivotal.

If employment gains accelerated in May to 150,000, the consensus in a Reuters poll and up from the 135,000 monthly average over the past two months, it would suggest the economy has regained internal momentum and has greater ability to withstand the headwinds from Europe.

"The global economy is struggling. There is recession in Europe, a slowdown in emerging markets that hasn't fully run its course and China decelerating. To offset this trend, you have modest growth in the United States and Canada," said Craig Alexander, chief economist at TD Economics.

"Political risks are high but if Europe muddles through, a risk that has not yet fully run its course, we should see moderate US growth continue," he said.

A weaker jobs number and a rise in the unemployment rate from the current 8.1 percent level, however, would suggest that businesses are growing increasingly wary as financial markets display unease over Europe and the rest of the world slows.

Narim Behravesh, chief economist at IHS Global Insight, said he sees little evidence yet that Europe's problems have spilled over to the United States. He said he is tempted to think that the slowdown in emerging markets is temporary, reflecting the lagged effects from their monetary tightening in the latter half of 2011. Additionally, a fresh round of stimulus measures promised by China should prevent a serious slump.

"We will probably see another couple of months of mixed data and then a firming, as long as Europe steers clear of crisis," he said.

European high-wire act

But Europe is casting a long shadow.

European Union leaders are playing a high-wire act in trying to convince the Greek public ahead of fresh elections on June 17 that they must stick to their austerity program if they wish to remain in the euro zone monetary union.

But as governments and banks draw up contingency plans to handle a possible Greek euro-zone exit, and polls show the leftist anti-austerity camp holding a lead in Greece, investors' hopes are diminishing for a happy ending in Europe.

Further complicating the picture is Spain, where the banking system needs recapitalizing and regional governments are running short of cash. This makes Spain highly vulnerable to market attack if Greece were to leave the euro. Italy, Portugal and Ireland could then be in the line of fire.

"The situation in Europe is becoming more uncertain," Michelle Meyer, a Bank of America economist, warned clients.

Lacking a clear road map for how EU leaders plan to stabilize the financial system and shore up monetary union, investors are fleeing the euro. It has lost more than 5 percent of its value in less than a month to reach a 22-month low against the dollar.

The weakening euro raises concern about spillover effects to the United States economy, even if Greece stays in the euro zone.

A costlier US dollar makes US exports more expensive in world markets, and if Europe sinks into recession, the United States will lose one of its primary export markets.

But the trade impact on the US economy would be quite small. Trade with Europe accounts for only a sliver of total US output, or 1.3 percent, and Bank of America said that recent research shows that exchange rates are far less of a factor today in determining import prices than they were in prior decades.

The International Monetary Fund, Bank of International Settlements and the US Federal Reserve have found that the pass-through effects of exchange rates to import prices have declined to about 20 percent from 50 percent in 1970s and 1980s. And the Organization for Economic Cooperation and Development found it would take a 10 percent depreciation of the euro against the dollar over one year to shave 0.1 percentage point from annual US growth in gross domestic product.

The primary impact on the United States from a worsening European crisis would be from financial markets turmoil.

If global stock markets plunged and the banking system in Europe seized up, Craig Alexander at TD Economics said, "It would be a mess. It would be welcome back to Lehman Brothers in 2008." –Reuters

source: gmanetwork.com