US: PepsiCo H1 profits drop 14%, but "on-track" for FY targets

• First-half net profits drop 14% to US$2.63bn
• Operating profits decrease by 9%
• Sales flat at US$28.9bn in the period
• Company on-track to hit FY targets 

PepsiCo has posted a 14% drop in first-half profits as the refranchising of its drinks business in China and Mexico impacted sales.

Operating profits fell by 9% to 4.1bn over the same period, according to H1 and Q2 results released today (25 July). Sales were flat in H1, but dropped 2% in the second quarter. Second-quarter net profits fell by 21%. 

“PepsiCo is diligently executing the strategy we set forth at the start of the year, and we remain on track to achieve our full-year targets,” said PepsiCo chairman & CEO Indra Nooyi.

Net revenue for PepsiCo's global beverages declined by 4% in the first six months of the year and dropped by 8% in Q2.

Overall net sales in emerging and developing markets decreased by 8% in Q2. PepsiCo blamed the drop on beverage refranchisings in China and Mexico and said organic sales grew by 9% in the same quarter. It also said overall net sales were affected by acquisitions and divestitures and foreign exchange translation and, on an organic basis, grew by 5%.

PepsiCo Americas Beverages saw net sales drop 3.5% in the first six months of the year compared to a year earlier while operating profit dropped 11%. In Q2, net sales fell by 5% and operating profit by 15%.

PepsiCo said it spent US$137m in the first half of the year on its deal with Tingyi, which will greatly expand its reach in China. PepsiCo announced it was to complete the tie-up with the noodles and soft drinks maker in March.

To read just-drinks' coverage of PepsiCo's H1 conference call, click here.

To find out analysts' reaction to the company's performance, click here.

To read PepsiCo's results announcement, click here.