PepsiCo Inc.'s First-Quarter Earnings Fall 1.4% Due to Higher Costs
Operating profit declined in the quarter, primarily as a result of increased commodity costs which offset the benefits of net pricing and savings resulting from recent restructuring activities.
27 April 2012 --- PepsiCo has announced that its first-quarter net income has fallen slightly from a year ago.
Operating profit declined in the quarter, primarily as a result of increased commodity costs which offset the benefits of net pricing and savings resulting from recent restructuring activities.
In beverages, the company’s net revenue declined 2 percent, primarily reflecting the impact of the refranchising of the division’s beverage business in Mexico, which reduced net revenue by 4 percentage points.
Volumes declined 1 percent in the quarter, with gains in Latin America offset by a decline in North America. Non-carbonated beverages grew 1 percent offsetting a 2 –percentage-point decline in CSDs. The decline in North America in part reflects the impact of pricing actions taken.
"Our first quarter results reflect the strength of our brands which allowed us to implement significant pricing actions," said PepsiCo Chairman and CEO Indra Nooyi. "Effective pricing and packaging initiatives drove 5 percent constant currency net revenue growth, allowing us to substantially offset approximately $300 million in commodity cost inflation."
"With disciplined pricing now in place, we're doubling our focus on the other key initiatives for 2012. Our top priorities include stepping up our brand support through increased advertising and marketing, accelerating our innovation, and driving an aggressive productivity agenda that includes a significant restructuring program.
“All of these initiatives were launched in Q1 with good results, are on track, and will gain momentum as the year progresses. We're executing on a clear, deliberate game plan that will enhance our competitiveness while also positioning PepsiCo for sustainable growth and value creation for the long term."
In Europe net revenue increased 13 percent, reflecting the benefit of the Wimm-Bill-Dann (WBD) acquisition and 5 percentage points of effective net pricing, offset partially by unfavorable foreign currency translation impact of 4 percentage points.
In Asia, Middle East & Africa net revenue growth of 12 percent was driven by effective net pricing and volume growth. Snacks volume increased 16 percent and beverage volume grew 2 percent.
In their Frito Lay business net revenue grew 4 percent, reflecting 6 percentage points of effective net pricing. Net revenue growth was particularly strong in the C-store, Dollar and Foodservice channels, supported by innovation and increased media spending.
