PepsiCo revenues rise behind top-line growth, extra week

by Jeff Gelski
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PURCHASE, N.Y. – PepsiCo reported net revenue grew 11% to $32,562 million for the fiscal year ended Dec. 31, 2005, which compared with $29,261 million in the previous fiscal year. An extra reporting week in 2005 contributed about one point of growth.

Earnings per share of $2.39 in 2005 compared with $2.44 per share in 2004. The 2005 earnings included the impact of a 27c per share tax charge related to the company’s repatriation of international cash, the extra reporting week and restructuring actions. Earnings per share in 2004 included tax benefits of 18c per share related to settlements of tax contingencies and a restructuring and impairment charge of 6c per share.

In 2006, PepsiCo expects an e.p.s. of at least $2.93 per share behind mid-single-digit volume and net revenue growth. The Purchase-based company anticipates net capital spending of about $2.2 billion and share repurchases of about $3 billion in 2006.

In the fourth quarter of 2005, net revenue of $10,096 million marked a 15% increase from $8,803 million in the previous year’s fourth quarter. Strong top-line growth across all its businesses drove revenue in the fourth quarter as did the extra reporting week. Earnings per share of 65c in the fourth quarter compared with 58c per share in the previous year’s fourth quarter.

All four of PepsiCo’s divisions reported revenue growth in 2005, both for the year and the fourth quarter.

The extra reporting week and sales of Lay’s, Tostitos, Cheetos and Santitas drove Frito-Lay North America volume gains of 3% for both the full year and the fourth quarter. Operating profit gains were 5% for the year and 4% for the fourth quarter. Net F.L.N.A. revenue gains of 6% for both the year and the quarter were offset somewhat by higher energy-related and raw material costs, increased advertising and marketing expense, and the impact of restructuring actions.

In PepsiCo Beverages North America, Gatorade sports drinks, Aquafina and Propel fitness water registered double-digit volume gains for the quarter and the year. Low-single-digit diet carbonated soft drink volume growth partially offset a low-single-digit decline in regular carbonated soft drink volume.

P.B.N.A. reported volume gains of 4% for both the fourth quarter and the year and net revenue gains of 9% for both the quarter and the year. Operating profit rose 7% in the year, but it dropped 3% in the fourth quarter as higher energy and raw material costs, increased advertising and marketing expense and the impact of restructuring actions more than offset the net revenue gains.

PepsiCo International saw operating profit growth of 22% for the year and 15% for the fourth quarter. Net revenue gains were 14% in both the year and the quarter. International snack volume grew 13% behind double-digit growth for Sabritas in Mexico, Russia, India, Australia and Turkey.

In Quaker Foods North America, hot cereal’s performance led to revenue growth of 10% for the year and 13% for the quarter. Volume grew 7% for the year and 10% for the quarter. Oatmeal, Aunt Jemima syrups and mixes, Rice-A-Roni and Pasta Roni side dishes drove volume growth for Q.F.N.A. Operating profit increased 11% for the year and 5% for the quarter.

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