PepsiCo expects "bumps in the road" in Q2

PepsiCo expects "bumps in the road" in Q2

PepsiCo has said that it expects the first-half of 2010 to be “challenging”, with “more bumps in the road” in the second quarter.

The soft drinks giant reported an increase in net profit today (22 April), driven by volume gains in its worldwide snacks and international beverage divisions.

For the three months to the end of March, the company earned US$1.43bn, a 26% increase on the prior year. Net sales increased to $9.37bn compared to sales of $8.26bn in the 2009 period.

Speaking at the firm’s earnings conference, CFO Hugh Johnston cautioned that, while PepsiCo is on track to hit its full-year targets, it expects a “challenging” first half of the year.

“What I’d say about the first quarter is that we’re actually on track relative to how we planned the business," Johnston said. "It’s a small quarter with low seasonality. We planned for a very tough first half with momentum improving in the second half of the year.

“What we have seen is that momentum has started to improve earlier, with quarter two coming through very well in March, getting growth back in both the east and the west of Europe," he continued.

"We do anticipate, though, that the first half will remain more challenging and in quarter two there will still be some bumps in the road.”

Johnston said that Western Europe is expected to recover from the downturn faster than Eastern Europe.

However, he added: “There has been enough green shoots coming through in Eastern Europe for us to feel very strongly about the strategic value and future of those markets. So, halfway through quarter two, it’s looking good.”

Overall, PepsiCo chairman and CEO Indra Nooyi said PepsiCo’s broad portfolio performed “well” in the quarter.

For fiscal 2010, PepsiCo said it is targeting an 11% to 13% growth rate for core constant currency EPS, against its fiscal 2009 core EPS of $3.71, with about 6% growth in core constant currency EPS in the first half of the year.