PepsiCo yesterday (12 October) reported that third-quarter profits jumped 71% in comparison with last year’s Q3 results, which were depressed by a tax charge. Sales for the third quarter of this year were up 9.4% on last year’s figures. However, the soft drink and food manufacturer’s warning of increased costs, particularly the price of oranges, depressed the maker of Tropicana’s share price, which closed 2% lower at US$62.85.
Profit for the quarter ended 9 September grew to $1.48bn, or 88 cents per share, from $864m, or 51 cents per share, for the comparable period of last year. Revenues climbed to $8.95bn from $8.18bn reported for the third quarter of last year.
Analysts, on average, had been expecting profits of 86 cents per share on revenue of just under $8.8bn.
Revenue grew in each of the Frito-Lay, Pepsi-Cola, PepsiCo International and Quaker Foods divisions.
Non-carbonated beverages posted 13% volume growth in North America, while carbonated beverages, including its flagship Pepsi brand, fell 2%.
In the company’s snacks unit, Frito-Lay’s revenues in North America were up 7%, boosted by double-digit gains in sales of Tostitos, SunChips and Quaker snacks. Meanwhile, the Doritos brand saw low single-digit growth, the company said.
PepsiCo raised its earnings guidance for the full year, increasing expected EPS from $2.95 to $2.98, slightly below Wall Street expectations.
Delivering her first set of quarterly results since taking the reigns at PepsiCo, CEO Indra Nooyi said: “We are very confident in our outlook for the balance of the year as all our businesses are performing well.”
Nooyi highlighted the strong performance of the company’s international units, however, she acknowledged, higher costs in the US put pressure on the company’s margins. “Our International business in particular performed very well, with double-digit sales and operating profit gains. This quarter demonstrates the flexibility we have within our portfolio to overcome cost challenges and competitive pressures to deliver strong top line and bottom line results,” she commented.
Nooyi said the biggest pressure on profits was the cost of oranges for its Tropicana products. “If you look across raw materials, the one that will make us stop and think hard is orange juice costs. We’re looking at the long-term supply chain initiatives to see how we can mitigate those. Orange juice is the one we need to focus on most,” she said.
The company’s earnings announcement was followed by a report from the US Department of Agriculture that Florida will produce the state’s smallest crop of oranges for 16-years, news which looks set to increase costs further still.