Lays maker expects "solid financial performance" despite macroeconomic challenges

Lay's maker expects "solid financial performance" despite macroeconomic challenges

PepsiCo today (11 February) forecast a 4% increase in underlying sales in 2016 - excluding foreign exchange and an extra trading week - down slightly on the growth the Lay's and Quaker owner saw last year.

The US group expects organic revenue growth of "approximately 4%", it said. Based on current foreign exchange market consensus rates, translation is expected to hit reported net revenue by four percentage points. The 53rd week this year is expected to contribute around one percentage point to reported net revenue growth.

PepsiCo's net revenues rose 5% in 2015 on an organic basis, with growth across its operating units. On a reported basis, net revenues fell 5% to US$63.06bn.

Operating profit was down 13% at $8.34bn due in the main to a $1.36bn impairment charge on PepsiCo's business in Venezuela.

PepsiCo provided a figure for "core, constant-currency operating profit", which excludes items like restructuring costs and pension benefits, as well as the impairment and foreign exchange. On that basis, operating profit rose 6%.

The Venezuela charge also weighed on PepsiCo's net income, which dropped 16% to $5.45bn.

Click here to read comments from PepsiCo chairman and CEO Indra Nooyi on the global economy.

2015 performance by division

Frito-Lay North America

Organic revenue +3%
Organic volume: +1%
Core, constant-currency operating profit: +7% - "positively impacted" by productivity gains and lower commodity costs, partially offset by cost inflation and higher advertising and marketing spend.

Quaker Foods North America

Organic revenue +1%
Organic volumes - flat
Core, constant-currency operating profit down 10% - Negatively affected by impairment charges related to PepsiCo's exit of a dairy joint venture, as well as cost inflation, higher advertising and marketing spend and the lapping of a gain associated with the sale of a cereal business in 2014. The division saw productivity gains, lower commodity costs and favorable product mix.

Latin America

Organic revenue +20%
Organic volume +1% (from snacks)
Core, constant-currency operating profit +9% - helped by productivity gains, that were partially offset by higher operating and commodity costs, primarily from transaction-related foreign exchange, as well as the impact of the deconsolidation of the Venezuela business, as well as the net impact of efficiency initiatives.

Europe Sub-Saharan Africa

Organic revenue +2%
Organic volume +1% (from snacks)
Core, constant-currency operating profit +2.5% - this division also saw productivity gains and was helped by efficiency initiatives and lapping prior-year impairment charges associated with a brand in Greece. PepsiCo also reported higher commodity costs, primarily from transaction-related foreign exchange, operating cost inflation, higher advertising spend and the lapping of a gain in 2014 from the sale of agricultural assets.

Asia, Middle East and North Africa

Organic revenue +4%
Organic volume +4% (from snacks)
Core, constant-currency operating profit +5% - the region's performance was helped by productivity gains and lower commodity costs. However, it saw operating cost inflation, higher advertising and marketing expense and an impairment charge associated with a joint venture. In addition, the impact of the refranchising of a portion of PepsiCo's beverage businesses in India and in the Middle East had a positive
impact.