The US soft drink bottler Pepsi Bottling Group today said that its earnings in the second quarter had fallen, as volumes fell below the company's expectations and soft results in the US offset growth in the company's international markets.

Net income in the quarter came in at US$131m, or diluted earnings per share of $0.47. These results compare to reported second quarter 2002 net income of $139 million, or EPS of $0.47.

Worldwide volumes were flat for the quarter on a constant territory basis. PBG's physical case volume was down 2% in the US, while volumes grew 3% in its international territories.

"During the second quarter, we faced a number of challenging conditions in our US markets," said John T. Cahill, chairman and chief executive officer of PBG.

"Volume performance in the US was below our expectations, primarily driven by softness in our cold drink business. The introduction of Mountain Dew LiveWire during the latter part of the quarter, however, has produced encouraging results. Our flavour and diet soft drink portfolios also generated positive results with Sierra Mist leading the growth. Throughout the quarter, we remained disciplined in the execution of our pricing principles, which in combination with strict cost controls, helped us generate financial results in line with our guidance for the quarter."

Cahill continued: "We were encouraged by the changing growth trends in our international territories, which improved throughout the quarter. From new product introductions in Russia, to improved on premise results in Spain, to solid growth in our Canadian business, these markets turned in positive topline and operating profit growth. In Mexico, we continued to make progress in spite of a weak carbonated soft drink market. Mountain Dew was launched throughout our markets in Mexico and has been well received by customers and consumers alike, while the introduction of a 2.5 liter package late in the second quarter is helping us to boost volume. Overall, we saw solid progress in our international businesses this past quarter and are confident that this momentum will continue throughout the summer season."

The company said that while it still expected to achieve EPS of $1.61 to $1.67 in the full year, given the volume trends of the first half of 2003, it now expects EPS to come in at the low end of that range.

The company also stated that it expects worldwide constant territory volume for the full year to be flat to up 1% and reported operating income to grow about 10%.