The Pepsi Bottling Group has reaffirmed its financial guidance for this year.

The company warned, however, that next year's performance would be hit by the adoption of expensing for stock options.

"On a constant territory basis," PBG said today (19 December), "worldwide physical case volume is expected to grow a robust 3%, with volume in the US increasing 2% for the year."

Operating income is projected to improve by 3% to 5%, despite ongoing pressure from significant raw materials and fuel cost increases.

"2005 is going to be a very good year for PBG shareholders," PBG chairman and CEO John T. Cahill said. "We will generate outstanding topline growth across all of our major geographic territories this year. We also delivered on our commitment to return cash to shareholders through another increase in our dividend and continued share repurchases."

Cahill said: "In the US, we had a number of successes, including strong performances from Lipton Iced Tea and Tropicana fruit drinks. The pricing environment has been favourable this year with our most recent rate increases holding in the marketplace.

"Russia and Turkey continued to exceed our expectations in Europe, capitalising on strong innovation and continued improvements in our selling capability. We have also generated solid topline improvement in Mexico and will achieve profit growth, though below our expectations."

Worldwide volume is expected to grow by about 3% next year, with the US increasing volume by 1% to 2%. PBG forecasts continued reported net revenue per case improvements, up 2% to 3% on a worldwide basis.

"We're entering 2006 with solid momentum behind us and I have great confidence in our plans for next year," Cahill added. "Cost pressures will continue to be an issue in 2006, though we expect them to moderate."

PBG plans to issue its fourth-quarter and full-year 2005 results at the end of January next year.