Snack-to-cereal food giant PepsiCo reaffirmed its full-year expectations today (11 July), when it reported what was described as a “strong” first-half performance.
PepsiCo reported a near 17% increase in net profit, which rose to US$4.92bn in the six months to 17 June, while operating profit increased 7.4%. The group’s profit was lifted by the one-time gain from the sale of PepsiCo’s stake in Britvic, which added 6% to earnings per share. The year-on-year comparison also benefited from the lapping of an impairment charge on the company’s stake in Tingyi-Asahi Beverages Holding Co.
Sales at the US-based food and beverage group were also higher, rising 1.8%. Revenue growth was supported by organic sales growth, which more than offset the 1% drag forex put on the top line.
Organic revenue growth, excluding the impact of currency exchange, slowed slightly compared to the same period of last year, with organic sales rising 2.6% in the first six months of 2017.
On a segment basis, PepsiCo flagged operating cost inflation across all of its food divisions – Frito-Lay North America, Quaker Foods North America, Latin America, Europe and sub-Saharan Africa and Asia, the Middle East and north Africa. The company did, however, note that this pressure on operating profitability was more than offset by productivity gains.
“The power and durability of our brand and product portfolios, strong marketplace execution, and the balance of our geographic footprint enabled us to deliver strong operating results in the midst of pockets of macroeconomic challenges and increasingly dynamic retail and consumer landscapes,” said chairman and CEO Indra Nooyi.
Wells Fargo analyst Bonnie Herzog noted: “We are encouraged by solid pricing PepsiCo appears to be getting in several key divisions, but were somewhat disappointed in North American beverage [segment] results.”
Nooyi said the result was “very much in line with our expectations”, adding the company remains “on track to meet our 2017 financial goals”.
For the full year, PepsiCo expects to report organic revenue growth of “at least” 3%. Higher organic sales will be offset against a 2% negative impact from currency exchange. The lapping of a 53rd trading week in the previous financial year is also expected to trim 1% off the top line. Nevertheless, PepsiCo said it anticipates full-year EPS of $5.13, compared to EPS of $4.85 last year.