US snacks and soft drinks giant PepsiCo has reported lower third-quarter profit, due to a tax charge related to international profit repatriation.
The company reported net income of US$864m, or 51 cents per share, for the third quarter to 3 September, compared to $1.36bn, or 79 cents per share, for the corresponding period of last year. Earning in the latest quarter included a 27 cents per share charge related to the company’s intent to repatriate $7.5bn of international earnings under the provisions of the American Jobs Creation Act. The third quarter of last year included tax benefits of $221m, or 13 cents per share. Excluding these tax items, earnings were up 18% to 78 cents per share. Net Revenue rose to $8.18bn from $7.26bn a year earlier.
“We are very pleased with our performance for the quarter, especially on the top line. Each of our operating divisions contributed to the very positive overall results. Our international operations, in particular, continue to perform very well, and our North American beverage business capitalised on strong weather-driven demand to deliver an outstanding quarter,” said chairman and CEO Steve Reinemund.
“Looking ahead to the fourth quarter, we are encouraged by the momentum in our businesses, but we expect the recent hurricanes to negatively affect some key input costs and, potentially, consumer spending. We are not unique in having to address these challenges, but clearly must acknowledge them,” he said, adding that the company expects to exceed its previously stated 2005 operating and financial objectives.
Frito-Lay North America (FLNA) net revenue increased 6%, led by growth of Lay’s, Cheetos, Tostitos and Quaker snacks. Core salty snacks revenue grew 5% on volume growth of over 2%. Solid volume growth in trademark Lay’s, Cheetos, Tostitos and Sunchips was partially offset by a slight decline in trademark Doritos.
Revenues from the division’s other macro snacks products grew almost 10%, driven by double-digit growth in Quaker Chewy Granola bars and rice cakes products, and the strength of the cookie, cracker and meat snack lines.
PepsiCo International profits grew 28% on broad-based gains in both snacks and beverages. Snacks volume growth of 7% in the quarter was driven by strong double-digit growth in India, Turkey, Russia and China, along with low single-digit growth at Gamesa in Mexico. These gains were partially offset by declines of less than 1% at Sabritas in Mexico and Walkers in the UK. Both Sabritas and Walkers volume trends improved sequentially from the second quarter. Combined acquisition and divestiture activity had no net impact on PI’s overall snack volume growth rate.
Quaker Foods North America (QFNA) had 2% net revenue increase, driven by growth of Rice-A-Roni and Life cereal. Net revenue grew 2% and volume was even with the year-ago quarter. The volume performance reflects double-digit growth in Rice-A-Roni, high single-digit growth in Life cereal and low single-digit growth in Cap’n Crunch cereal and Quaker Oatmeal. These gains were offset by low single digit declines in Aunt Jemima syrups and mixes, as well as declines in other breakfast foods.