Q2 income increases 13% at PepsiCo

by FoodBusinessNews.net Staff
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PURCHASE, N.Y. — Fueled by division operating profit growth of 10%, net income climbed 13% to $1,194,000,000 at PepsiCo Inc. in the second quarter ended June 11, equal to 70c per share. Net income in the same year-ago quarter totaled $1,059,000,000, or 61c per share.

Net sales in the second quarter increased to $7,697,000,000, up 8.8% from 7,070,000,000 in the same period a year ago. Sales in the quarter were led by double-digit growth at PepsiCo International and Quaker Foods North America and solid performance in North American beverage and snacks units.

"We are very pleased with our performance for the quarter and the first half of the year," said Steve Reinemund chairman and chief executive officer. "Our portfolio of operating businesses delivered another quarter of very strong top-line and bottom-line results, giving us added confidence in our ability to meet the business and financial objectives we’ve laid out for 2005."

Operating profit in Frito-Lay North America (F.L.N.A.) totaled $594,000,000 on sales of $2,373,000,000, up from $560,000,000 and $2,235,000,000, respectively, in the same year-ago period.

"Second-quarter revenue increased 6% with strong growth in most of the division’s largest brands," PepsiCo said. "Core salty snacks revenue grew 6% on volume growth of almost 3%, led by high single-digit growth in Lay’s, Cheetos and Tostitos brands. Revenues from the division’s other macro snacks products grew mid-teens, with double-digit growth in Quaker brand Chewy Granola bars, Fruit and Oatmeal bars and rice cake products. Revenue growth outpaced volume growth as a result of favorable pricing and mix."

Operating profit in Quaker Foods North America (Q.F.N.A.) totaled $113,000,000, up 24% from $91,000,000 in the second quarter of fiscal 2004. Sales in the division were $350,000,000, up from $303,000,000.

"Double-digit volume growth of Quaker oatmeal, Rice-A-Roni and Pasta Roni side dishes, and Aunt Jemima syrup and mix led to 12% volume growth and a 16% revenue gain in the quarter," PepsiCo said. "Operating profit increased 24%, reflecting revenue growth and favorable cost- of-sales performance, offset somewhat by increased advertising and marketing costs to support new products and core brands."

PepsiCo Beverages North America (P.B.N.A.) posted operating profit of $555,000,000 on sales of $2,218,000,000, up from $534,000,000 and $2,134,000, respectively, in the same year-ago quarter. Volume in the unit declined slightly lapping over 7% growth from 2004.

"Volumes declined slightly in the second quarter, lapping the strongest quarter from 2004 when volumes increased over 7%," PepsiCo said. "Unfavorable Easter holiday timing had a 50-basis point impact on reported volume growth in the quarter. A carbonated soft drink volume decline of 4% was substantially offset by a 5% increase in non-carbonated beverage volume.

"Non-carbonated beverage volume growth was fueled by double-digit growth in Aquafina and Propel fitness water and low-single-digit growth in Gatorade. Aquafina benefited from lower retail pricing and the introductions of the Aquafina Flavor Splash and Sparkling lines. Tropicana chilled juice volume declined mid single-digits as a result of higher pricing.

"Carbonated soft drinks performance reflects a mid-single-digit decline in regular C.S.D.s, partially offset by low-single-digit growth in diet C.S.D.s."

Earnings per share growth for the quarter was bolstered by a $35 million pre-tax gain recognized on the sale of shares in The Pepsi Bottling Group, a 2% reduction in the number of weighted average shares outstanding, strong equity bottler results and a 25 basis-point reduction in the company's effective tax rate.

The company updated its full-year earnings outlook, stating it now expects earnings per share for 2005 of $2.56 to $2.59, excluding the impact of the 53rd week. Including the impact of the 53rd week, the company expects earnings per share of $2.60 to $2.63. The company expects the impact of the 53rd week to increase earnings per share by 4c to 5c.

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