PepsiCo profits, cash flow strong
PURCHASE, N.Y., Oct 22 (Reuters) - PepsiCo Inc Wednesday reported a solid gain in third quarter profits, citing its cash flow and
strong balance sheet following the spin-off of Tricon Global Restaurants Inc (YUM) two weeks ago.
Excluding one-time items in both years, third quarter net income per share increased 40 percent, PepsiCo said.
It reported net income per share of $0.42 for the quarter ended September 6, including $0.35 per share from continuing operations
(packaged goods) and $0.07 per share for discontinued operations (restaurants). That compared to $0.09 per share in 1996, when
$0.01 came from continuing operations.
Chief Executive Officer Roger Enrico, calling Tricon the second largest restaurant company in the world, said: ''We're very pleased
that Tricon's reception by investors has been favorable as reflected in their market capitalization of about $5 billion.''
He said before the spin-off, ''our three businesses had generated $2.4 billion in free cash during the first three quarters. If we add to
that the $4.5 billion of cash received from Tricon at the time of the spin-off, it's easy to see that PepsiCo is beginning this new era
with a very strong balance sheet and a lot of flexibility.''
''In fact, in this first period of reporting packaged goods on a stand- alone basis, they posted an operating profit advance of 28
percent while investing aggressively for the long-term, a very solid beginning.''
PepsiCo said worldwide snack food sales grew seven percent and operating profits grew 16 percent with both the North American
and international sides of the business posting strong advances.
At Frito-Lay North America, sales grew six percent due to a four percent increase in pound volume and the carry-over impact of last
year's pricing actions.
The volume growth reflected particularly strong advances for Doritos, Lays and Tostitos. Profit growth also accelerated as a result of
better controls on distribution costs. Year-to-date, volume growth was three percent, the company said.
International snack foods results primarily reflect a strong 11 percent increase in salty snacks by volume in the quarter, bringing
year-to-date volume growth to 11 percent. For the quarter, this volume increase was driven by continued strength in Mexico and
Brazil as well as gains in the U.K.
PepsiCo said worldwide beverage sales grew two percent and profits grew 40 percent driven by a sharp increase in the international
side of the business.
''In International we continue to make solid progress against our strategic goals. For example, we realigned our bottling
infrastructure in several sub-scale markets like the Philippines and Monterrey, Mexico,'' the company said.
''In the last few weeks, we also announced the refranchising of Japan to Suntory. In our emerging markets we continue to show very
strong volume growth, particularly in China and India.
''In our critical mass markets we have also seen steady progress demonstrated by the volume and profit growth in Europe and Asia
this quarter. Finally, we continue to stabilize our share in key leadership markets.''
The company said its North American business also continued to make good strategic progress.
''Almost all of our bottlers have signed our new contract which gives us the support we need to aggressively pursue new fountain
accounts. At the same time, we have continued to staff our new fountain account group to meet this challenge. So far this year, we
have also placed 80,000 new vendors- coolers in the market and expect to reach 100,000 by year end.'' the company said.
''On the tactical front, the business continued to be very competitive throughout the summer with aggressive pricing in the
take-home channels over both big holiday weekends and for most of June and July. This put considerable pressure on profits during
the quarter.''
It said the lower pricing helped stimulate volume growth in the bottle and can side of the business although volume performance by
existing fountain accounts was slow. As a result, system-wide bottler case sales grew four percent in the quarter and
year-to-date. |
