Profits Tumble at PepsiCo but Gatorade and Lipton Tea Perform Strongly

19 Apr 2016 --- PepsiCo, the US food and drinks giant, has reported a near 25 percent fall in net profit in the first quarter and has warned of “uncertainty” in the global economic markets ahead.

In the 12 weeks to March 19, net profits tumbled 24 percent to $931 million on the year.

Revenues fell 2.9 percent to $11.86 billion. Revenues were hit after it wrote down the value of its Venezuelan business last year.

Top performers for PepsiCo were Quaker Foods North America and Frito Lay North America, which both saw double digit growth in profits.

But there were double digit falls in profits across Latin America; Europe, Sub-Saharan Africa; and Asia, Middle East and North America.

Sales in Latin America, which makes up nearly 10 percent of overall revenues, tumbled over 26 percent to $1.04 billion, as PepsiCo was hurt by the strong dollar.

PepsiCo took a $373 million write down on the value of its Chinese beverage joint venture.

In Europe and Sub-Saharan Africa, sales dropped 9.1 percent to $1.36 billion.

Volume sales of beverages were up three percent on the year. Strong performers were sports drinks Gatorade and Lipton tea.

Profits at Frito-Lay North America were up 11 percent to around $1 billion.

Chief executive Indra Nooyi said: “We delivered strong first quarter operating results driven by balanced execution of our commercial agenda and productivity programs.”

“Our marketing initiatives and new product launches are generating sold organic top line growth, and our focus on driving greater efficiency throughout our operations contributed significantly to attractive core gross margin expansion.”

“We are off to a strong start to the year and that gives us added confidence in achieving our financial objectives for 2016.”

She told analysts that it was “a difficult environment” adding that PepsiCo could be facing “uncertainty” in the market ahead.