Coca-Cola Enterprises, the largest bottler of Coca-Cola, said on Tuesday that it planned to cut about 3,500 jobs, or 5 percent of its global work force, after taking a $2.9 billion impairment charge in 2006.
A fourth-quarter loss was $1.71 billion, or $3.59 a share, the Atlanta-based bottler said in a statement. The job cuts will cost $300 million over the next two years. Profit in 2007 is expected to fall.
The company said it has to contend with large increases in the cost of goods in North America in 2007, primarily for the aluminium used in cans and for high-fructose corn syrup, which is used as a sweetener in soft drinks.
North American raw goods costs, including high-fructose corn syrup and aluminium, will rise 9 percent per case in 2007, compared with an average 2.5 percent increase during the past five years, Coca-Cola Enterprises said. The company depends on North America for two-thirds of sales.
The huge demand for corn that has been prompted by the growing alternative ethanol industry has pushed US prices to near 10-year highs.
“There has been a fundamental change in the sweetener market driven by corn, ultimately driven by the corn used in ethanol,” the chief financial officer, Bill Douglas, said in a conference call.
Sweetener costs will rise at least 20 percent and aluminium cans will go up ``mid-teens,''
Moody’s Investors Service said Tuesday that it might cut its rating for Coca-Cola Enterprises, citing the weak financial results in the fourth quarter and all of 2006. Coca-Cola Enterprises holds an A2 long-term rating, which is the sixth-lowest investment-grade rating.
The company said that it was restructuring parts of its corporate, North American and European operations, but that most of the jobs would be cut in North America.
Coca-Cola Enterprises, said that the impairment charge relates to good will with a number of acquisitions completed more than 10 years ago.