Investment: CCB finds the rouble hurts `the real thing'

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The Independent Online
COCA-COLA Beverages could teach Goldman Sachs a thing or two about timing a float.

The soft drink bottler joined the stock market in July, weeks before shares around the world tumbled.

But fund managers, who forced the share price up to 191p in July in their desperation to get hold of the scarce stock, look less canny. Yesterday, a gloomy set of interim results sent shares in CCB down 21.5p to a new low of 134p.

The immediate culprit is Russia. Although CCB has no direct exposure to the country, the devaluation of the rouble dragged down currencies in Ukraine and Belarus, forcing up prices and denting sales volumes.

True, the region accounts for just 8 per cent of sales and adjacent markets in Poland and the Czech Republic are apparently unaffected. But the new areas also offered some of the greatest potential - turnover in the Ukraine grew by almost 30 per cent last year.

With the help of its parent company, CCB is switching cash earmarked for advertising into cutting prices in those markets.

However, any immediate recovery looks unlikely.

The episode has probably put back CCB's growth plans by a year or more. For a company whose valuation leans heavily on discounted cash flow projections - forecasts for earnings before tax, depreciation and amortisation were yesterday scaled back to pounds 115m from pounds 135m - this is a major setback.

CCB points out that consumers in its region spend much less on the black sticky stuff than their peers in more prosperous economies.

The company will continue to spend heavily on fridges and cooled vending machines in an attempt to boost consumption.

Ultimately, however, demand for Coca-Cola is a function of economic welfare.

While prospects in Eastern Europe remain uncertain, the shares look anything but the real thing. Avoid.