US: Pepsi earnings up as Quaker beds in
Soft drinks and snack giant PepsiCo saw its earnings per share grow 14% for its third quarter as most of its units posted gains in sales and profits. The news drove both Pepsico and rival The Coca-Cola Company's share price up.
Fully diluted earnings per share for the third quarter of 2002 were up 14% to 56 cents, on a comparable basis. On a reported basis, earnings per share for the quarter were $0.54, an increase of 57% over the prior year.
Chairman and chief executive officer Steve Reinemund said: "Our portfolio of businesses complemented each other and performed very well overall. We're pleased to report very strong operating profit and earnings per share growth. Our margins expanded as a result of synergies from our merger with Quaker, as well as strong productivity across our divisions. We increased our market share across our key US businesses, and our cash flow was extremely healthy."
Reinemund continued: "Volume growth was strong across the portfolio, even as we rolled back the incremental promotional activity at Frito-Lay North America. In fact, promotional activity at Frito-Lay was normalised by Labor Day, as planned. Our businesses are fundamentally very healthy, and we are confident that we will achieve the higher end of our 13-14% earnings per share growth target for this year."
Total servings worldwide grew more than 4% for the quarter and year to date, while worldwide servings of beverages were up 5% for the quarter and 4% year to date.
Total line of business operating profits in the third quarter grew 11% to $1.5 billion, driven by strong Quaker merger synergies and productivity across the divisions. Year to date, line of business operating profits also grew 11%, to $3.9 billion.
Volume for PepsiCo Beverages North America (PBNA) grew 5%. Gatorade's volume grew 16% and PCNA's bottler case sales were up 4%. However Tropicana's volume was flat. Year to date, PBNA volume growth was 4%.
Looking forward, PCNA expects to continue to benefit from recent product launches, including Pepsi Blue, which will become available in take-home sized packages in the fall, as well as Diet Code Red and Brisk Lemonade.
Total volume for Gatorade/Tropicana North America for the third quarter of 2002 increased 10%, driven by strong 16% volume growth for Gatorade. Tropicana's volume was essentially flat. On a year-to-date basis, total volume grew 7%, reflecting 15% volume growth in the Gatorade portfolio, partially offset by a 2% decline in Tropicana products.
The volume at Tropicana was a sequential improvement over the second quarter of 2002, the company said. Volume gains in the Tropicana Pure Premium and Dole Blends portfolios were offset by declines in the ambient and "from-concentrate" juice businesses.
PBI bottler case sales were up 5% in the third quarter and 4.5% year to date, led by widespread gains across most of the top markets, including double-digit growth in, China, India, Turkey and Russia. The introduction of new products, such as Mountain Dew, Pepsi Twist and line extensions Mirinda contributed to the overall volume growth. In addition, PBI's portfolio of non-carbonated beverages grew at a double-digit rate. The volume growth was restrained by a boycott of American products in the Middle East and weak local macroeconomic conditions, especially in Argentina.
Net revenues were essentially flat both for the quarter and year to date, reflecting the impact of franchising existing Gatorade businesses in certain countries, as well as the Middle East boycott and country mix.
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