US: PepsiCo cost cuts drive Q3 earnings growth

By | 8 October 2009

Falling costs and investments in innovation have helped PepsiCo today (8 October) report a solid profit performance in its third quarter of 2009, despite a dip in revenues.

The food and drinks maker reported earnings per share of US$1.09, and in constant currency the company delivered 5% net revenue growth and an 8% increase in core EPS.

Indra Nooyi, PepsiCo chairman and CEO, said: "PepsiCo's diversified food and beverage portfolio and our advantaged business model continued to drive solid results this quarter. Our teams around the world leveraged PepsiCo's agile go-to-market system to deliver our brands at differentiated value to consumers, who are still feeling the pinch of the global recession despite improving macroeconomic indicators.

"We will continue to make targeted investments across our entire portfolio, and we expect these to ramp up next year as we begin to realise the benefits of the integration of our two anchor bottlers. These investments in innovation, infrastructure, key markets and people development, coupled with our operating agility and focus, give me great confidence in both the near-and long-term growth prospects of PepsiCo."

The company's CFO Richard Goodman said PepsiCo was targeting EPS growth of 11 to 13% in core constant currency. "As we progress through 2010, if we do better than this range we will take the opportunity to make additional strategic broad-based investments in our business to enhance our competitiveness," he added.

The maker of Pepsi-Cola and Frito-Lay snacks reported net income of $1.72bn, or $1.09 per share, in the third quarter from $1.58bn, or 99 cents per share, a year earlier. Excluding items, PepsiCo earned $1.08 per share.

Revenue fell 1.5 percent to $11.08 billion.

PepsiCo said its American beverages division's (PAB) performance reflected the continued softness in the overall liquid refreshment beverage category in North America, recording a 6% decline in volume, 7% decline in net revenue and a 5% decline in operating profit.

PepsiCo International (PI) delivered a strong quarter, however, with net revenue up 13% and operating profit up 31%.

"While the macroeconomic environment continued to be challenging in Europe this quarter, Europe drove margin expansion and profitability by balancing revenue growth, tight cost controls and productivity gains," the company said.

Europe beverage volume grew 9%, driven by the Lebedyansky acquisition. Solid improvement in Western Europe and Turkey also contributed to a sequential improvement in volume growth.

Asia/Middle East/Africa beverage volume grew 9%, boosted by a strong performance in India.

For the full PepsiCo release click here.

A fuller insight into PepsiCo's third quarter results will follow the company's press conference, to be held at 8am EST. Visit the site later for the update.

Sectors: Soft drinks, Water

Companies: PepsiCo, Lebedyansky

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