Higher raw material costs slow earnings growth at PepsiAmericas

by Eric Schroeder
Share This:

MINNEAPOLIS — Higher raw material costs led a slowdown in earnings at PepsiAmericas Inc., the world’s second-largest manufacturer, seller and distributor of PepsiCo beverages with operations in 19 U.S. states, Central Europe and the Caribbean.

Net income in the third quarter fell 17% to $53.1 million, equal to 42c per share on the common stock, down from $63.7 million, or 47c per share, in the same period a year ago. The year-ago results include a gain of 1c per share related to high-fructose corn syrup settlement proceeds.

Sales during the quarter rose 8% to $1,064.2 million, up from $982.9 million.

Worldwide volume increased 9%, or 2.8%, on a "constant territory" basis. PepsiAmericas said pricing increased only 1.5% on a constant territory basis, with pricing up 1.3% in the United States.

U.S. volume was up 1% in the quarter compared with a year ago. Carbonated soft drink volume declined mid single-digits, reflecting continued overall softness in the category. At the same time, the company grew the non-carbonated beverage category more than 30%, as Aquafina volume rose 40%.

Sales in the U.S. grew 2.3% to $841.5 million, driven by volume and net pricing increases. The company said its single-serve packages in the quarter were flat, while take-home packages slowed to 1% growth over the prior year.

"In the U.S., our top-line growth continued, with a better balance between volume and pricing," said Robert C. Pohlad, chairman and chief executive officer. "However, significant volume increases in our take home Aquafina business and a soft single-serve business continue to unfavorably impact our net pricing. This, along with higher raw material costs, has resulted in lower domestic profits than a year ago."

Mr. Pohlad added that higher raw materials costs will reduce fourth-quarter earnings by 2c per share. For the full year, PepsiAmericas lowered its outlook to a profit of $1.30 to $1.33 per share from $1.35 to $1.39 per share.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.



The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.