US: Analysts take aim at PepsiAmericas
PepsiAmericas has faced flak from US analysts as it reported a slump in third-quarter profits.
The company, the world's second-largest producer of PepsiCo products, yesterday (25 October) posted a 10% slump in operating income to US$110m.
PepsiAmericas, which has operations in 19 US states, Central Europe and the Caribbean, said revenues rose 8% thanks to acquisitions in Romania and Moldova and volume gains elsewhere.
"We are pleased with our top-line performance in the third quarter, reflecting pricing gains and volume increases in all of our geographies," said Robert C. Pohlad, chairman and CEO at PepsiAmericas.
"In the US, our top-line growth continued, with a better balance between volume and pricing. However, significant volume increases in our take home Aquafina business and a soft single-serve business continue to unfavourably impact our net pricing."
PepsiAmericas is planning to revamp its business in the US with a focus on setting up dedicated teams for each channel, rather than by geography.
Analysts in the US were unconvinced about the company's performance. Mark Swartzberg, an industry analyst at US bank Stifel Nicolaus, said the results were below expectations while, Carlos Laboy at Bear Stearns said PepsiAmericas had "stumbled" during its third-quarter.
However, Laboy saw some signs for hope at the company in the year ahead. He said: "We have reasons to believe that 2007 will evidence a return to earnings growth for PepsiAmericas. Simply put, innovation drives growth in the beverage category. We were much impressed by PepsiCo's innovation pipeline - for example Tava sparkling juices.
"PepsiAmericas promised meaningful pricing in the fourth quarter, which should drive the top line in 2007, if it can get the price-volume equation right - a big if. International seems on track to deliver, after delivering operating losses just three years ago. With a constructive macro outlook in Central Europe, international may begin to move the earnings needle next year."
Pohlad said PepsiAmericas has "a strong commitment to brand investment, driving sustainable growth in our international markets".
The company saw sales leap over 50% in Central Europe, while volumes were up by 3% in the Caribbean.
Pohlad added: "In the fourth quarter, we expect to maintain our top-line growth based on rate increases in the US and continued strength in our international businesses. Additional raw material cost challenges, however, will put pressure on our full-year earnings."
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